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Right of deduction EU VAT case law

195 cases of the Court of Justice and the General Court of the European Union on this point of VAT law, from 1989 to 2026.

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Under each case, what the Court decided, from its summary. The summaries are AI-generated and are not official documents: open the case for the Court’s own text.

C-167/26 RX Dyrektor Krajowej Informacji Skarbowej

Opinion of the Advocate General · 10 September 2026 · Poland

Review, when the right to deduct is exercised where the invoice arrives in a later period

Advocate General’s proposal, not a ruling. The Advocate General proposes that the Court hold that the judgment of the General Court of 11 February 2026 in Dyrektor Krajowej Informacji Skarbowej (T-689/24) affects the unity and consistency of EU law. On the substance she proposes that the provisions and principles at issue be interpreted as meaning, first, that the right to deduct input tax must be exercised in respect of the period during which the two required conditions are satisfied for the first time, the goods have been delivered or the services performed and the taxable person holds the relevant invoice, and, second, that they do not preclude national legislation under which a taxable person may not assert the right in a return for a period in which the substantive conditions were met but the invoice had not yet been received, even where the invoice arrived before that return was submitted.

T-397/25 A&P Deco

Judgment · 2 September 2026 · Netherlands

Letting the property back to the buyer does not travel inside the transfer of a business

The General Court held that the letting does not form part of the transfer of a totality of assets where the right to the letting arises on the occasion of the transfer. What passes is not a pre-existing right belonging to the business assets but a newly created contractual right, distinct from the transfer of the business. The fiction of continuity in Articles 19 and 29 therefore does not extend to the letting contract. The transferor continues to use the property for an exempt activity, namely the letting itself, so the use of the capital item changes and the deduction originally taken must be adjusted under Articles 184 to 190. That the transferee carries on the transferred activity in the same building does not alter that. The judgment separates two operations that are ordinarily concluded together and that both serve the continuity of the business, holding that they keep distinct legal characters.

C-513/24 Oblastní nemocnice Kolín

Judgment · 19 March 2026 · Czechia

Regulatory equipment requirements and general costs

Such costs do not qualify as general costs on that basis alone. A statutory obligation to acquire goods or services is not in itself enough to establish a direct and immediate link with taxable output transactions or with the taxable person's economic activity as a whole. Only the objective relationship counts, though the obligation is one relevant circumstance. Each item must be assessed separately by reference to its actual use and, in particular, its intended allocation. Equipment allocated exclusively to exempt care gives no deduction. Equipment also serving taxable supplies gives a pro rata deduction. Hospitals, clinics, laboratories and other regulated operators with mixed exempt and taxable activity cannot claim a blanket residual deduction on licensing related infrastructure by pointing to the regulatory rulebook.

C-515/24 Randstad España

Judgment · 12 March 2026 · Spain

Standstill clause and exclusions introduced on the date of accession

Article 176, second paragraph, does not preclude such national legislation. The standstill clause covers an exclusion entering into force on the accession date, provided its scope has not been widened. Here operators lost nothing, since no VAT deduction existed before. The Court added that excluding recreational and representation expenditure matches the Union legislature's own intention in the first paragraph, and that the exclusion was sufficiently precise rather than general. Deductibility for Spanish income tax purposes is irrelevant. Spanish blocks on deduction for sports and entertainment tickets and client, employee and third party hospitality survive, closing off a line of challenge based on the absence of a pre-accession VAT system.

C-521/24 Aptiv Services Hungary

Judgment · 12 March 2026 · Hungary

Late receipt of invoices and the period for deducting acquisition VAT

The Court held that those provisions preclude such national rules and practice. Where the substantive conditions are met and the invoices, a formal condition, arrived only later, the two cumulative conditions for exercise are satisfied in the period of receipt, and confining the taxable person to a self-correction that has already expired makes the right practically impossible or excessively difficult. The qualification is that the taxable person must have acted in good faith, with no fraud established, and within the applicable limitation period. Relevant to any business making intra-Community acquisitions where supplier invoices arrive years late, and to groups with decentralised invoice capture.

T-689/24 Dyrektor Krajowej Informacji Skarbowej

Judgment · 11 February 2026 · Poland

Late-received invoices and the period in which deduction may be exercised

Those provisions and the principles of neutrality and proportionality preclude such national rules. The right to deduct arises when the tax becomes chargeable and depends only on the substantive conditions. Possession of an invoice is a formal condition governing exercise. Where the taxable person holds a compliant invoice when filing the return for the period concerned, deduction must be allowed for that period. Article 273 does not justify a blanket measure ignoring the circumstances of each case. Polish taxable persons receiving supplier invoices after period end but before the filing deadline may claim in the earlier period, removing the cash-flow cost of a one-period deferral. Relevant to energy trading, clearing houses and any business with month-end invoicing lags, and to advisers reviewing historic Polish returns for repayment claims.

C-475/24 Fashion TV RO and Maestro

Order · 12 November 2025 · Romania

Use of criminal evidence in deduction disputes after proceedings against directors are discontinued

By reasoned order under Article 99, the Court held that the national court must verify that the substantive and formal conditions for deduction are met and may, to that end, examine evidence obtained in earlier criminal proceedings against persons distinct from the taxable person, provided the rights guaranteed by EU law, notably equality of arms and the rights of the defence, are respected. Discontinuance of those proceedings is irrelevant. The ne bis in idem question was inadmissible. Directors are not the same person as the company. The legal certainty limb was inadmissible for inadequate reasons. Confirms that a discontinued or time-barred criminal case against directors gives a company no immunity in the parallel VAT assessment.

T-363/25 UNIX Autó és Autóalkatrészkereskedelmi

Order · 30 October 2025 · Hungary

Deduction refused for an unreliable invoice where the chain paid the tax in full

The General Court holds that the directive precludes that practice. To refuse deduction the tax authority must establish to the requisite legal standard that the taxable person actively participated in VAT fraud, or knew or should have known that the invoice issuer had committed such a fraud. The absence of any loss to the public purse and the reality of the supply weigh against a refusal. Notable as one of the first VAT preliminary rulings delivered by the General Court under its new jurisdiction.

C-726/23 Arcomet Towercranes

Judgment · 4 September 2025 · Romania

Transfer pricing adjustments as consideration for intra-group services

Contractually detailed intra-group services remunerated by reference to the margin above 2.74%, calculated on an OECD-recommended method, are consideration for a supply of services for consideration. The remuneration is variable but neither voluntary nor uncertain, being fixed in advance on precise criteria. The authority may require evidence beyond the invoice that the services were actually supplied and used for taxed output transactions, provided it is necessary and proportionate. It may not require proof that the services were necessary or economically appropriate. A group treating a year-end transfer pricing true-up as a pure profit adjustment outside VAT cannot maintain that position where the payment is tied to identified services under an intra-group agreement. Relevant to transfer pricing and indirect tax teams in multinational groups, and to advisers handling Romanian and other reverse-charge intra-group management fee audits.

C-501/24 Klinka-Geo Trans

Order · 2 May 2025 · Hungary

Refusing deduction where the transaction never took place, without testing knowledge of fraud

Ruling by order, the Court held that the Directive does not preclude a refusal made without any examination of the recipient's knowledge where the authority establishes that the transaction did not take place. The knowledge test belongs to cases where a real transaction is tainted by fraud elsewhere in the chain, not to cases where there was no supply at all. The Court declared itself manifestly without jurisdiction on the second question and the fourth and sixth questions manifestly inadmissible, and confirmed that the national court must disapply directions it considers contrary to clear case law without needing to make a prior reference. The distinction it draws is the one that decides many Hungarian and Romanian disputes.

C-270/24 Granulines Invest

Order · 14 February 2025 · Hungary

A fictitious invoice label does not replace proof of the buyer knowledge of fraud

The Court answers no on both counts. To refuse deduction the authority must establish to the requisite legal standard that the taxable person actively participated in VAT fraud, or knew or should have known that the invoice issuer had committed such a fraud. A defective date on the invoice cannot found a refusal where the authority has all the information needed to check the substantive conditions, and correcting the invoice cannot be made a precondition. A recent restatement, in a reasoned order, of the two pillars of the deduction case law.

C-262/24 Pegazus Busz

Order · 12 February 2025 · Hungary

Evidence of fraud must be put to the taxable person, and a lower court may depart from binding directions

Ruling by order, the Court declared several of the questions manifestly inadmissible or answerable from existing case law. On the merits it held that Article 47 of the Charter requires the taxable person to have knowledge of, and to be able to debate on an adversarial basis before the national court, the evidence on which the administration relies to find participation in evasion. It further held that the primacy of EU law and Article 267 TFEU oblige the national court to set aside directions it considers contrary to EU law, without being required to make a preliminary reference first. Two points of real practical weight in fraud cases.

C-527/23 Weatherford Atlas Gip

Judgment · 12 December 2024 · Romania

Deduction of VAT on intra-group administrative services

Article 168 precludes such a refusal where it is established that the services are used by the taxable person for the purposes of its own taxed output transactions. Simultaneous supply to other group members is irrelevant, as is the necessity or economic profitability of the purchase. But the national court must verify that the share of costs borne corresponds to the services actually received for its own transactions. VAT on expenditure serving third parties' transactions is not deductible. Useful for groups operating shared service or management charge arrangements across borders, where local authorities challenge deduction on "benefit to the group" or "no business need" grounds.

C-331/23 Dranken Van Eetvelde

Judgment · 12 December 2024 · Belgium

Joint and several liability for another trader's VAT fraud

Article 205 permits liability for the entire VAT debt, with no apportionment by degree of participation, provided the taxable person can show it took all reasonably required measures to ensure its transactions were not part of the fraud. The underlying presumption must be rebuttable. No account need be taken of the actual debtor's deduction right, since in fraud cases that right is refused anyway. Article 50 does not apply because conduct in different tax years is not the same facts, whatever national law says about a continuing offence. Confirms that Member States may collect the full VAT loss from any knowing or negligent participant in a chain fraud, without civil style apportionment. Relevant to wholesale distribution and any sector exposed to missing trader arrangements.

C-680/23 Modexel

Judgment · 5 December 2024 · Portugal

Carrying forward excess VAT after cessation and resumption of activity

Article 183 does not preclude such legislation. Cessation of economic activity ends taxable person status, so there is no "following period" to which the excess can be carried. On resumption the activity is new. Member States may therefore confine recovery to a refund claim within 12 months of cessation, provided the principles of equivalence and effectiveness are respected. The Court noted a 12 month period (and a fortiori four years) does not appear to make recovery impossible or excessively difficult. A business deregistering with a VAT credit has to claim the refund within the national time limit.

C-624/23 SEM Remont

Judgment · 21 November 2024 · Bulgaria

Deduction where the supplier registered late and issued no corrected invoice

Neither the Directive nor the neutrality principle precludes such national legislation. The report was not provided to the recipient, cannot be equated with a contract capable of serving as an invoice, and the recipient neither paid nor was liable to pay the input VAT. The loan arrangement created no such liability and was not an invoice correction. Substantive conditions for deduction were therefore unmet, and the case law on retroactive correction, which presupposes input VAT actually borne, does not apply. Confirms that formal-defect tolerance does not rescue a deduction where the recipient never bore VAT.

C-475/23 Voestalpine Giesserei Linz

Judgment · 4 October 2024 · Romania

Deduction on equipment provided free of charge to a subcontractor

Free provision to the subcontractor does not of itself break the link. Deduction must be allowed where the cost forms a component of the taxable person's output transactions or general costs. The qualification is that if the making available goes beyond what is necessary for that purpose, the link is partly broken and deduction is limited to the objectively necessary part. Absence of separate accounts is a formal failing and cannot bar deduction where the authorities can verify the substantive conditions. Penalties may be imposed instead. Useful for manufacturers and toll processing structures where the principal supplies plant, tooling, cranes or premises to contractors at no charge, a common pattern in automotive, foundry and construction supply chains.

C-429/23 NARE-BG

Judgment · 12 September 2024 · Bulgaria

Time limit for deducting pre-registration input VAT

Those provisions and principles do not preclude the refusal. A 12-month limitation period running from VAT registration is compatible. Direct taxes and VAT are fundamentally different in nature and not comparable for equivalence purposes, so extending direct tax deadlines only was permissible, and the state of emergency covered only part of the deduction window. The adjustment mechanism in Articles 184 and 185 cannot create a right of deduction that has already been lost by lapse of time, and neutrality does not override that. Confirms that pandemic-era relief for direct taxes gives no read-across to VAT deduction deadlines, and that a correcting return filed out of time cannot revive a forfeited deduction. Relevant to newly registered businesses, particularly property developers and others incurring substantial pre-registration input tax, which must claim within the domestic window.

C-696/22 C (Court-appointed administrators and liquidators)

Judgment · 13 June 2024 · Romania

Chargeability on continuous services and proof of the link for input deduction

Such continuous services fall within Article 64(1) where they give rise to successive statements of account or payments, so VAT becomes chargeable on expiry of each period irrespective of non-payment. Article 90(1) governs non-payment. Increased turnover or volume of taxable transactions is irrelevant to the deduction link. The objective content, actual use and exclusive reason for the purchase decide. A hearing breach requires annulment only if the outcome might have differed, suspension of enforcement being irrelevant. Suppliers billing periodically, insolvency practitioners, professional firms and any provider with milestone or periodic fee arrangements, cannot defer chargeability by making payment conditional on the customer's cash position.

C-532/23 Lear Corporation Hungary

Order · 10 April 2024 · Hungary

Late payment interest on VAT refunds withheld under an unlawful national condition

By reasoned order under Article 99, the Court held that Article 183 does not preclude national law from treating a refund claim as including an interest claim. The authority may confine itself to the period stated in a timely interest claim. However, it may not treat a second claim as new and time-barred where it concerns interest on VAT retained through the same breach of EU law and the taxpayer only learned of the wider period from a later national decision following a Court ruling. Such a claim supplements the first. Relevant to taxpayers pursuing interest on VAT withheld under national conditions later found incompatible with EU law, particularly the long-running Hungarian "paid consideration" claims.

C-341/22 Feudi di San Gregorio Aziende Agricole

Judgment · 7 March 2024 · Italy

Denial of deduction to "non-operating" companies

Status as a taxable person depends solely on whether an economic activity is actually carried on. It cannot be made conditional on output transactions exceeding a pre-set income threshold. Nor may deduction be refused on the ground that output transactions are insufficient. A volume-based presumption is unconnected to the criteria for establishing fraud or abuse and goes beyond what is necessary under Article 273. Deduction may still be refused where fraud or abuse is established on objective evidence, not by assumption. Italian companies caught by the Article 30 Law No 724/1994 shell company regime can challenge refusals of VAT credits, refunds, offsets and carry-forwards based purely on turnover falling short of the asset-based threshold.

C-180/22 Mensing II

Judgment · 13 July 2023 · Germany

Margin scheme, acquisition VAT and the profit margin

The acquisition VAT forms part of the taxable amount. "Purchase price" in Article 312(2) covers only what the dealer pays his supplier, not tax paid to the Treasury, and the VAT to be deducted under Article 315 is that on the sale itself. Fiscal neutrality and the aim of preventing double taxation cannot override clear wording, even though domestic purchases and self-imports (Article 317, second paragraph) are treated more favourably. Only the EU legislature can change this. Art and antiques dealers using the margin scheme for works acquired cross-border from creators or their successors face a higher taxable amount than on equivalent domestic purchases or own imports, because acquisition VAT is neither deductible nor a margin reduction.

C-426/22 SOLE-MiZo

Order · 20 June 2023 · Hungary

Interest on wrongly withheld VAT credits must compensate for the passage of time

The Court holds that they do preclude that practice, in so far as it is liable to deprive the taxable person of adequate compensation for the loss caused by not having the sums available, and fails to offset the economic burden of the wrongly withheld tax. The interest must cover the whole period during which the taxable person was deprived of the money, up to actual payment. The third instalment of the Hungarian interest saga, after Delphi Hungary and the first Sole Mizo judgment.

C-114/22 Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition)

Judgment · 25 May 2023 · Poland

Deduction refused because the transaction is void under national civil law

The Court held that those provisions preclude such legislation. Invalidity under national civil law cannot in itself justify refusal. The authority must either show that the criteria for a fictitious transaction under EU law are met (no actual supply, chargeability under Article 63 never arising) or, where the transaction did take place, that the deduction is claimed fraudulently or abusively. Civil-law sham status may be evidence of fraud or abuse, but nothing more. Relevant wherever national anti-abuse or anti-avoidance rules key deduction off civil-law nullity, notably Article 88(3a)(4)(c) of the Polish VAT Law.

C-690/22 Shortcut

Order · 24 May 2023 · Portugal

Generic invoice wording such as 'application development services' and the right to deduct

Ruling by reasoned order, the Court held that those provisions preclude such a refusal. The particulars required by Article 226 exist to enable the authorities to check that the tax has been paid and, where appropriate, the existence of the right to deduct. They are not an end in themselves. Where the administration has the information it needs to establish that the substantive conditions are met, it cannot deny the deduction merely because the description on the invoice is expressed in general terms. The substance-over-form line applied to the wording of invoices, and a useful authority for service businesses whose output is hard to itemise.

C-418/22 Cezam

Judgment · 17 May 2023 · Belgium

Penalties calculated on gross VAT before deduction

Article 273 and those principles do not preclude such legislation, subject to the referring court's assessment of proportionality in the individual case. Neutrality is not infringed where the fine does not itself deny or hinder the right of deduction. Here input VAT was allowed of the authorities' own motion. EN.SA. is distinguished because there the output tax had been paid and no revenue was at risk, whereas here declaration and payment were withheld over a prolonged period. Confirms that Member States may compute VAT penalties on gross output tax rather than on the net amount payable, provided the right of deduction itself remains intact.

C-519/21 DGRFP Cluj

Judgment · 16 February 2023 · Romania

Unregistered association without legal personality, who is the taxable person and who deducts

The parties to an association contract without legal personality that was not registered with the tax authorities before the activity began cannot be treated as taxable persons alongside the person liable on the taxable transaction. The sales' legal effects concerned only the registered owners. Absence of an invoice in the claimant's own name is not fatal, but deduction depends on objective evidence that the goods and services were actually supplied to her by taxable persons for her own taxed transactions, avoiding double deduction. The third question was inadmissible. Relevant to property developers and joint ventures structured as contractual associations or silent partnerships, particularly where individuals pool land and finance.

C-289/22 A.T.S. 2003

Order · 9 January 2023 · Hungary

Deduction refused for fraud, regulatory breaches up the chain and the taxable person's duty of care

By reasoned order under Article 99. Cost reduction is legitimate because refusal requires a wholly artificial arrangement whose sole or essential aim is a tax advantage contrary to the Directive. A breach of national sector rules is not itself proof of fraud, but may be one indication in an overall assessment. The authority must characterise the fraud and prove participation or knowledge, though not identify every perpetrator. Taxable persons need not verify upstream compliance, unless indications of irregularity call for greater care.

C-378/21 Finanzamt Österreich (VAT invoiced incorrectly to final consumers)

Judgment · 8 December 2022 · Austria

VAT wrongly invoiced to final consumers at too high a rate

Article 203 does not apply. It targets the risk of loss of revenue created by the recipient's right of deduction, and it bites only on the amount exceeding the VAT properly due under Article 193. Where the recipients are exclusively final consumers with no deduction right, there is no such risk and the supplier is not liable under Article 203 for the incorrectly invoiced part. The remaining questions did not need answering. Relevant to B2C businesses that have applied too high a rate, especially retail, leisure and hospitality operators issuing simplified till receipts where reissuing invoices to individual customers is impracticable.

C-512/21 Aquila Part Prod Com

Judgment · 1 December 2022 · Hungary

Proving participation in carousel fraud and the limits of the duty of diligence

The authority cannot rely merely on the existence of a circular invoicing chain. It must accurately describe the constituent elements of the fraud, prove the fraudulent conduct and establish either active participation or that the taxable person knew or ought to have known, though it need not identify every operator. Where fraud indicators exist, greater diligence may be required, but not complex checks equivalent to the authority's own investigations. Food safety breaches cannot alone justify refusal, but may be one element among others. Relevant to any business facing deduction refusals in chain transaction cases, particularly in Hungary and in the food sector.

C-596/21 Finanzamt M (Scope of the right to deduct VAT)

Judgment · 24 November 2022 · Germany

Refusal of deduction in full where the buyer ought to have known of upstream fraud

Deduction may be refused to the second purchaser who knew or ought to have known of the original seller's VAT fraud, and the first purchaser's own knowledge of that fraud does not prevent this. Refusal is not limited to the amount of the fraud or the tax loss. The right to deduct must be refused in its entirety, because absence of such knowledge, after checks reasonably required of any operator, is an implied material condition of deduction. No risk of revenue loss need be shown. Confirms that the knowledge test operates as an all or nothing material condition, not a proportionate sanction, and is separate from penalties under Article 273. Relevant to anyone dealing in high value movable goods, notably motor vehicles.

C-227/21 HA.EN.

Judgment · 15 September 2022 · Lithuania

Deduction where the vendor is insolvent and cannot pay the output VAT

Article 168(a), read with fiscal neutrality, precludes such a practice. Mere failure to pay duly declared VAT is not fraud, so the purchaser cannot be treated as knowingly participating in fraud, nor is there abuse, since a secured creditor taking over the property after a failed auction pursues debt recovery, not a tax advantage. The Court distinguished ALTI is that a purchaser in a court supervised compulsory sale is not in the position of a contractual counterparty of the principal VAT debtor. Member States may instead use the Article 199(1)(g) reverse charge. Purchasers of real estate in enforcement and insolvency sales, and secured creditors taking assets in satisfaction of debt, keep their deduction even where the vendor's inability to pay is obvious. Relevant to distressed debt, restructuring and property advisers.

C-98/21 Finanzamt R (Deduction of VAT linked to a shareholder contribution)

Judgment · 8 September 2022 · Germany

Input VAT on services supplied as a shareholder contribution in kind

The holding company has no right to deduct that input tax. Although supplying management and accounting services for consideration makes the holding company a taxable person, the bought-in services were the very object of the shareholder contribution, which is part of share holding and not an economic activity. Their actual use was in the subsidiaries' transactions, so they had no direct and immediate link with the holding company's own supplies and were not general costs. The abuse question did not need answering. The reliance on the contribution sustaining the subsidiaries' need for management services was irrelevant. Groups using a managing holding company to buy in construction, planning or marketing services and inject them into exempt-supplying subsidiaries cannot recover that input VAT, even where the holding company also invoices genuine management fees.

C-194/21 Staatssecretaris van Financiën (Time-barring of the right to deduct)

Judgment · 7 July 2022 · Netherlands

Adjustment cannot revive a time-barred right of deduction

Articles 184 and 185 do not preclude refusal. The adjustment mechanism presupposes an existing right of deduction and cannot itself create one. Where the right has been lost through expiry of a national limitation period, adjustment is unavailable, whether or not first use differs from intended use. Fiscal neutrality is a principle of interpretation only and yields to legal certainty. Absence of fraud, abuse or revenue loss does not permit circumvention of the limitation period. Confirms that Articles 184 to 186 are not a second window for deductions missed at the outset.

C-188/21 Megatherm-Csillaghegy

Order · 3 June 2022 · Hungary

Forfeiture of input VAT deduction on revocation of a tax identification number

Ruling by reasoned order under Article 99, the Court held that those provisions and the principles of neutrality and proportionality preclude such automatic forfeiture where the substantive conditions for deduction are met and the taxable person has not acted fraudulently or improperly. The qualification is that refusal remains possible where the breach of formal obligations prevents conclusive proof that the substantive conditions are satisfied, or where fraud or abuse is established by the authorities. The national court must verify these matters. Confirms Siemens Gamesa and Promexor Trade for pre-revocation periods. Relevant to advisers handling Hungarian deregistration cases and any businesses whose VAT numbers have been cancelled and later reinstated, including historic claims.

C-582/20 SC Cridar Cons

Judgment · 24 February 2022 · Romania

Suspension of a tax appeal pending criminal proceedings

No preclusion, subject to three conditions: the suspension must not push the complaint beyond a reasonable time. The suspension decision must state its reasons in fact and law and be open to judicial review, and, if the refusal turns out to breach EU law, the taxable person must be repaid within a reasonable time with default interest where appropriate. Suspension of enforcement need not be automatic, but must be available where there is serious doubt as to lawfulness and serious, irreparable harm would otherwise result. Confirms that tax authorities may pause appeal proceedings to await criminal evidence, but fences the practice.

C-487/20 Philips Orăştie

Judgment · 10 February 2022 · Romania

Bank guarantees and the refund of disputed VAT, the principle of equivalence

Articles 179 and 183, together with the principle of equivalence, preclude national procedural rules governing VAT refund claims based on breach of the common VAT system that are less favourable than those applicable to comparable claims founded on domestic law concerning other taxes and duties. The Court left it to the referring court to identify genuinely comparable domestic actions and to verify that the VAT rules are in fact less favourable, and likewise to assess whether the financial burden lasts an unreasonable period. Effectiveness was not in issue. Confirms that Member States' procedural autonomy over excess VAT refunds is bounded by equivalence. Relevant to businesses in Romania and elsewhere disputing VAT assessments while running repayment positions, and to advisers structuring guarantees pending appeal.

C-9/20 Grundstücksgemeinschaft Kollaustraße 136

Judgment · 10 February 2022 · Germany

Timing of input tax deduction where the supplier accounts for VAT on a cash basis

Article 167 precludes such legislation. Where a Member State uses the Article 66(b) derogation so that VAT becomes chargeable to the supplier only on receipt of payment, the customer's right of deduction likewise arises on payment. The link between chargeability and deduction may be severed only within the optional and much narrower scheme of Article 167a, which Germany had not adopted. The second question did not require an answer. Where a supplier accounts for VAT on a cash basis under an Article 66(b) derogation, the customer's deduction right follows the supplier's chargeability and not the time of supply.

C-156/20 Zipvit

Judgment · 13 January 2022 · United Kingdom

Deduction of VAT on supplies mistakenly treated as exempt

The recipient has no right to deduct in those circumstances. Where the contract made the price exclusive of VAT and the recipient liable for any VAT, and it was not legally impossible for the supplier to recover the tax but it never did, the invoiced price is a price exclusive of VAT. Tulica and Plavosin does not apply. "Due" requires an enforceable claim, so no demand means no deductible tax. Articles 90 and 185 are irrelevant where VAT was never charged. Third question left unanswered. Recipients of supplies retrospectively found to be taxable cannot gross up historic exempt-treated prices and claim input tax where no VAT was ever charged or demanded, even if the mistake originated with the tax authority and recovery is now time-barred. Relevant to postal, financial, education, health and welfare sectors and to any business relying on published administrative guidance later found to misstate an exemption.

C-154/20 Kemwater ProChemie

Judgment · 9 December 2021 · Czechia

Deduction where the true supplier is unidentified

Deduction must be refused, without proof of fraud or knowledge of fraud, where the true supplier has not been identified and the taxable person fails to show that the supplier was a taxable person. The qualification is that refusal is only permissible if, on the factual circumstances and the evidence produced, the information needed to verify that status is lacking. Taxable person status is a material condition and may follow from the facts, for example where the volume and price of supplies show the small business exemption cannot apply. Naming the supplier on the invoice is formal.

C-334/20 Amper Metal

Judgment · 25 November 2021 · Hungary

Deduction of VAT on advertising services said to be overpriced and ineffective

Deduction is available where the advertising is a supply subject to VAT under Article 2 and has a direct and immediate link with taxable output transactions or with the taxable person's economic activity as a whole, as general costs. Neither an excessive price against an authority's reference value nor the absence of any turnover increase is relevant. Article 80 does not apply between independent parties. The national court must still verify the link, and whether the spending is entertainment expenditure outside strictly business expenditure under Article 176. Tax authorities cannot use profitability, economic rationality or benchmark pricing to deny deduction on arm's length purchases.

C-358/20 Promexor Trade

Judgment · 18 November 2021

Deregistration for VAT, continued trading, and the right to deduct that follows

The Court held that those provisions and principles do not preclude such national legislation, where the identification has been revoked because no taxable transactions were indicated in the returns filed for six consecutive months and the taxable person continues its activities notwithstanding the revocation, provided that the taxable person is able to re-register for VAT purposes and to deduct the input VAT paid. The Court added that the fact that the director of the taxable person is a partner in another company which is the subject of insolvency proceedings cannot, in itself, be relied on to refuse systematically the re-registration of that taxable person for VAT purposes. Identification is a formal requirement and not a substantive condition of the right to deduct, and the judgment keeps that distinction workable by making the compatibility of the national regime conditional on a real route back to registration.

C-281/20 Ferimet

Judgment · 11 November 2021 · Spain

Deduction where the invoice names a fictitious supplier under the reverse charge

Naming the supplier is a formal condition, but the supplier's status as a taxable person is a material one. Deduction must be refused where, on the facts and the evidence the taxable person produces, the information needed to verify that the true supplier was a taxable person is lacking, or where it is established to the requisite legal standard that the taxable person committed VAT fraud or knew or should have known the transaction was connected with such fraud. Neither a risk of revenue loss nor a tax advantage need be shown. Relevant to scrap, metals and waste traders and anyone self-billing under domestic reverse charges.

C-80/20 Wilo Salmson France

Judgment · 21 October 2021 · Romania

Holding an invoice and the refund period for non-established taxable persons

No refund without an invoice, but a document is only not an invoice if its defects are so serious as to deprive the authorities of the information needed to support the claim. A claim cannot be refused merely because the VAT became chargeable in an earlier period if invoicing occurred in the claim period. However, unilateral cancellation and reissue by the supplier, after a refusal decision has become final, does not revive the right or shift it to a later period. Relevant to any business claiming cross-border refunds under the Eighth Directive procedure and to advisers handling refused claims.

C-45/20 Finanzamt N and Finanzamt G (Communication of the allocation decision)

Judgment · 14 October 2021 · Germany

Deadline for communicating the allocation of mixed-use assets to business assets

The allocation decision itself is a substantive condition. Communicating it is only formal. Nevertheless, a Member State may refuse deduction where, by expiry of the statutory annual return deadline, the authority has not been put in a position to establish allocation by an express decision or sufficient evidence, unless the arrangements for exercising the option breach proportionality. Intention may be shown implicitly, so the national court must weigh less onerous penalties such as administrative fines against outright refusal. Time limits for signalling allocation of mixed-use capital goods survive, but only subject to a proportionality review that national courts must actually carry out.

C-21/20 Balgarska natsionalna televizia

Judgment · 16 September 2021 · Bulgaria

Public broadcasting funded by State subsidy and the scope of deduction

The activity is not a supply for consideration. There is no legal relationship of reciprocal performance with viewers and no direct link between the services and the subsidy, which is set per programme hour regardless of viewership. Le Rayon d'Or is distinguished. The exemption question therefore falls away. Under Article 168, input VAT is deductible on purchases used for activities giving rise to deduction and not deductible on purchases used for out-of-scope activities. The method of financing is irrelevant. Member States set the apportionment method, respecting proportionality. Public broadcasters and comparable subsidy-funded bodies must treat free-to-air public service output as outside the scope of VAT, not exempt, and exclude it from the Articles 173 to 175 pro rata. Relevant to advisers to public bodies, cultural and media organisations and any taxable person with substantial grant funding alongside taxable supplies.

C-695/19 Rádio Popular

Judgment · 8 July 2021 · Portugal

Warranty extension commissions in the deductible proportion

Subject to national verification, the retailer is in direct contact with both insurer and insured and performs the essential functions of an insurance agent, so the commissions are exempt under Article 135(1)(a). Article 174(2) does not refer to point (a), and Article 135(1) clearly separates insurance from financial transactions. An insurance transaction therefore cannot be an incidental financial transaction, whether or not it is incidental. Fiscal neutrality cannot widen an exemption or derogation absent clear wording. Retailers, motor dealers and other suppliers earning insurance commissions on extended warranties, payment protection or similar cover must include that exempt turnover in the denominator of their partial exemption fraction.

C-182/20 Administraţia Judeţeană a Finanţelor Publice Suceava and Others

Judgment · 3 June 2021 · Romania

Automatic adjustment of deductions on entering insolvency

Articles 184 to 186 preclude national legislation or practice imposing automatic adjustment of pre-insolvency deductions where the initiation of the proceedings does not prevent the operator's economic activity, within the meaning of Article 9, from continuing, including for the purposes of liquidating the undertaking. Economic activity is objective and judged without regard to purpose or results. A change of purpose to realising assets does not of itself end it. Continued registration and output VAT charged on liquidation sales point to continuing activity. A later refund possibility does not cure the restriction. In Member States whose rules treat a liquidation declaration as ending taxable activity, a blanket clawback assessment on input tax recovered before the insolvency does not stand. Relevant to capital goods, stock and lease-related deductions alike.

C-108/20 Finanzamt Wilmersdorf

Order · 14 April 2021 · Germany

Deduction may be refused for known upstream fraud even without active participation

The Court holds that the directive does not preclude that practice. A taxable person who knew or should have known that by his purchase he was taking part in a transaction connected with VAT fraud must be regarded as a participant in that fraud, irrespective of whether he profits from it or plays any active role. Refusing the deduction in those circumstances is compatible with the directive. A reasoned order that closes off a line of argument sometimes run in defence.

C-42/19 Sonaecom

Judgment · 12 November 2020 · Portugal

Deduction on abortive acquisition costs, but not on a bond loan that was on-lent

The Court answers yes to the first and no to the second. The consultancy costs are deductible even though the acquisition never happened, since the intention to carry out taxable transactions is what counts. The loan commission is not deductible, because the capital was in fact used for a different purpose, an exempt on-lending to the parent, which broke the link with the intended taxable activity. The judgment draws the line by reference to what actually happened to the resources.

C-734/19 ITH Comercial Timişoara

Judgment · 12 November 2020 · Romania

Deduction on abandoned investment projects and the commission agent fiction

Deduction is retained where the projects were abandoned owing to circumstances beyond the taxable person's control, and no adjustment is required so long as the taxable person still intends to use the goods for taxed transactions. The tax authorities may not presume abuse or fraud. Awareness of a planning or profitability risk does not defeat the right. The commission agent fiction requires an agency agreement and identical onward supplies, including transfer of ownership, so it does not apply here. Useful for developers and their advisers facing clawback of VAT on aborted schemes.

C-405/19 Vos Aannemingen

Judgment · 1 October 2020 · Belgium

Deduction where costs also benefit a third party

An ancillary benefit to a third party, flowing from services acquired in the taxable person's own interest, does not restrict deduction. That holds equally where the costs attach to particular output transactions rather than overheads, but only in so far as a direct and immediate link with the taxable person's own taxable transactions is maintained. No deduction arises for the part of the expenditure linked to transactions carried out by the third party. The unexercised ability to on-charge is one relevant factor, not decisive. Relevant to property developers building on third party land, and more widely to any business bearing marketing, agency or administrative costs from which a counterparty also profits.

C-791/18 Stichting Schoonzicht

Judgment · 17 September 2020 · Netherlands

Single-step adjustment of input tax on first use of capital goods

The Court held that Articles 184 to 187 do not preclude such a single-step adjustment. Article 187 governs only variations arising after first use, measured against the deduction entitlement for the year of first use. A discrepancy identified at the moment of first use falls under Articles 184 and 185, whose detailed rules Member States lay down under Article 186. The scheme must still allow spread adjustment for later variations, as the Netherlands rules did. The second question was not answered. Relevant to property developers and investors, and to anyone deducting input tax on capital goods on the basis of intended use.

C-837/19 Super Bock Bebidas

Order · 17 September 2020 · Portugal

Standstill exclusions on accommodation, meals, cars and fuel from the date of accession

Ruling by reasoned order, the Court held that those provisions do not preclude such legislation. The standstill in Article 176 allows a Member State to retain the exclusions from the right of deduction that its law provided for at the date of its accession, and the reference point for a State that joined later is the date of accession rather than 1 January 1979. That the expenditure is shown to have been used for taxed transactions does not displace the standstill. Confirms for later accession States the reading already applied to the founding Member States, and explains why blocked input tax on hotels, meals, cars and fuel persists across the Union in patterns that look arbitrary.

C-528/19 Mitteldeutsche Hartstein-Industrie

Judgment · 16 September 2020 · Germany

Input tax on infrastructure works carried out for a municipality

Deduction is available where the road serves both the taxable person's economic activity and the public, provided the works did not exceed what was objectively necessary for that activity and their cost is reflected in the price of the taxable output transactions. Excess works break the link in part. A unilateral operating authorisation is not consideration but a condition sine qua non, so the works are not made for consideration. Nor are they a deemed supply under Article 5(6), given the actual end-use benefits the taxable person.

C-610/19 Vikingo Fővállalkozó

Order · 3 September 2020 · Hungary

Refusal of deduction where invoices are held implausible in a supply chain

Ruling by reasoned order under Article 99, the Court held that the Directive precludes that national practice. None of those four grounds, alone or together, justifies refusal. The concept of supply of goods is objective and is satisfied even if the goods were neither made nor supplied by the invoice issuer and the actual source is unidentified. Refusal requires the authorities to prove, on objective evidence, active participation in fraud or that the taxable person knew or should have known of fraud upstream. The penalty and Charter questions were inadmissible. A further restatement, in order form, of Mahagében and Signum Alfa for advisers handling Hungarian and other chain-supply deduction denials, especially in goods trading and machinery purchases.

C-611/19 Crewprint

Order · 3 September 2020 · Hungary

Fraud cannot be inferred from contractual structure, subcontracting chains or personal links

The Court holds that the directive precludes that practice. To justify a refusal it must be established, otherwise than by suppositions based on predetermined criteria, that the taxable person actively participated in a fraud or that it knew or should have known that the transactions were connected with a fraud committed by the invoice issuer. Verifying that is a matter for the referring court. The order is the clearest statement that the indicia so often relied on by tax authorities, an unusual contractual route, a long subcontracting chain, related parties, are starting points for an investigation and not findings of fraud.

C-374/19 Finanzamt Bad Neuenahr-Ahrweiler

Judgment · 9 July 2020 · Germany

Adjustment of deduction where taxed use of mixed-use capital goods ceases

The Court held that those provisions do not preclude an adjustment. Where taxed transactions cease but exempt transactions continue in the same premises, the premises are used from then on exclusively for exempt purposes, breaking the direct link with taxed output, and the reasoning in Imofloresmira (property left genuinely empty pending intended taxed use) does not apply. Adjustment is due even if the cessation was outside the taxable person's control. It would be otherwise if other taxed uses were found. That is for the national court to verify. Relevant to any operator of mixed-use immovable property within the adjustment period, notably care homes, hospitals, schools and other exempt providers with ancillary taxed catering or retail.

C-446/18 Agrobet CZ

Judgment · 14 May 2020 · Czechia

Withholding an undisputed portion of excess VAT during a tax inspection

Excess VAT is not an indivisible whole. An undisputed portion can in principle be identified and refunded early, and legislation preventing a taxable person from adducing evidence of one breaches the principle of good administration. But there is no refund obligation unless it can be established clearly, precisely and unequivocally that excess VAT (possibly less than the amount relating to the unexamined transactions) will remain whatever the inspection's outcome. That is for the national court to verify. Relevant to any business, particularly commodity traders in repayment positions, facing prolonged inspections aimed at a narrow set of supplies.

C-661/18 CTT - Correios de Portugal

Judgment · 30 April 2020 · Portugal

Changing the input tax apportionment method after the final pro rata is fixed

A blanket national prohibition on changing the deduction method after the final proportion has been fixed is compatible with Article 173(2)(c). But Articles 184 to 186 preclude refusing correction where the Member State allows the actual use method, the taxable person was unaware and acting in good faith when choosing its method that a supply treated as exempt was taxable, the general national limitation period has not expired, and the change gives a more precise measure of deductible VAT. Mixed businesses whose output VAT treatment is retrospectively revised, whether by ruling, legislative change or liberalisation, can reopen the apportionment method itself and not merely recompute the turnover pro rata. Relevant to postal, financial, insurance, healthcare and public bodies sectors, and to anyone relying on an outdated binding ruling.

C-13/18 Sole-Mizo and Dalmandi Mezőgazdasági

Judgment · 23 April 2020 · Hungary

Interest on excess deductible VAT withheld in breach of EU law

The base rate approach fails effectiveness and fiscal neutrality where that rate is below what a taxable person other than a credit institution would pay to borrow the same amount, and where interest stops at the end of the reporting period with nothing to compensate for monetary erosion until actual payment. However, a five-year limitation period running from entry into force of the corrective legislation is compatible, as is requiring a specific request for default interest, which then runs only from expiry of the 30 or 45 day processing deadline. Businesses holding historic interest claims against Member States for VAT withheld contrary EU law now have a benchmark. Relevant to Hungarian claims and to comparable interest disputes elsewhere.

C-630/19 PAGE International

Order · 26 February 2020 · Portugal

A partial deduction on food costs is compatible with the standstill clause

The Court holds that they do not preclude such legislation. The second paragraph of Article 176 permits a Member State to retain the exclusions in force at the date of its accession, and a measure that narrows an existing exclusion by allowing a partial deduction moves in the direction the directive intends. It therefore falls within the standstill clause rather than outside it. The order confirms the ratchet built into Article 176.

C-707/18 Amărăşti Land Investment

Judgment · 19 December 2019 · Romania

Land registration costs borne by the purchaser as a deemed supply to the vendor

The Directive does not prevent the parties from agreeing that the purchaser bears some or all of the administrative costs, but such a clause is not decisive for the purchaser's right of deduction. Because first registration and entry of the proprietor are a statutory obligation of the vendor, a purchaser acting in its own name who performs those steps acts on behalf of the vendor and is deemed under Article 28 to have supplied the services to the vendor, even though the price excludes the value of the land-registration work and nothing was re-invoiced. Purchasers of unregistered immovable property who absorb the vendor's registration, notarial and surveying costs cannot simply treat the input VAT as their own investment expenditure.

C-189/18 Glencore Agriculture Hungary

Judgment · 16 October 2019

Findings made against suppliers, and the conditions for using them against the customer

The Court held that such legislation or practice is not precluded, subject to three conditions. First, it must not relieve the tax authority of the obligation to disclose to the taxable person the evidence, including evidence originating in the related procedures, on which it intends to base its decision, and the taxable person must not be deprived of the right effectively to challenge those findings of fact and legal classifications in the procedure brought against him. Second, the taxable person must be able to have access, during that procedure, to all the evidence obtained in the related or other procedures on which the authority intends to rely or which may assist the exercise of the rights of the defence, unless objectives of public interest justify restricting access. Third, the court hearing the action against the decision must be able to review the legality of the way that evidence was obtained and used, and the findings in the decisions taken against the suppliers that are decisive for the outcome. The judgment accepts the administrative economy of reusing findings made against suppliers, but attaches to it a set of conditions that operate at three separate stages: disclosure by the authority, access by the taxable person, and review by the court.

C-329/18 Altic

Judgment · 3 October 2019 · Latvia

Food traceability duties and the right to deduct

Deduction cannot be refused on the sole ground of breach of the food traceability identification duty. That duty serves food safety, not fraud detection, and identification by name and address normally suffices. Such a breach may nonetheless be one of several consistent indications of knowledge of fraud, particularly where circumstances should have raised serious doubts about the supplier's existence or identity. Failure to verify suppliers' food business registration is irrelevant. That is a check the purchaser cannot be required to make. Relevant to agri-food, feed and commodity traders and their advisers facing denial of deduction based on sectoral regulatory failings.

C-273/18 Kuršu zeme

Judgment · 10 July 2019 · Latvia

Refusing deduction in a supply chain requires proof of an undue tax advantage

Those two facts, a chain of successive sales and collection from a warehouse of someone other than the invoiced supplier, are not in themselves sufficient to establish an abusive practice. The authority must identify the undue tax advantage obtained by the taxable person or the other participants. Where no such evidence is adduced, deduction cannot be refused. Separately, the national court must still determine to which supply in the chain the single intra-Community transport is ascribed, which governs the extent of the deduction or refund right. Useful for anyone facing a Baltic or wider EU audit where deduction is denied simply because intermediaries appear economically pointless.

C-316/18 The Chancellor, Masters and Scholars of the University of Cambridge

Judgment · 3 July 2019 · United Kingdom

Costs of managing an endowment fund are not deductible overheads

The Court holds that it is not entitled to deduct that input tax. The investment activity falls outside the scope of VAT, and the costs of collecting and placing the donations attach to that non economic activity rather than to the economic activity. The mere fact that the income is then used to fund the whole range of activities does not make the management fees a cost component of the taxable output supplies. The judgment tightens the overheads route opened by Kretztechnik and Cibo.

C-566/17 Związek Gmin Zagłębia Miedziowego

Judgment · 8 May 2019 · Poland

Apportionment of input tax where national law provides no method

Article 168(a) precludes such a practice. The obligation to apportion follows from the wording of Article 168(a) itself, and the absence of national apportionment rules cannot extend the right of deduction to costs of activities outside the scope of VAT. Fiscal legality, as a general principle of EU law, requires only the essential features of the tax to be laid down by law, not every technical aspect. Apportionment is an ancillary pre-condition, particularly where the taxable person can choose a method or seek a ruling. Relevant to public bodies, associations of municipalities, waste and utilities operators, charities and holding structures carrying on both economic and non-economic activities.

C-225/18 Grupa Lotos

Judgment · 2 May 2019 · Poland

Standstill clause and the block on deducting VAT on accommodation and catering

Article 168(a) precludes the exclusion in so far as its scope was extended after accession, so a taxable person supplying tourism services cannot be denied deduction on accommodation and catering re-invoiced to other taxable persons. It does not preclude the exclusion, as it stood before accession and was maintained, for a taxable person not supplying tourism services who re-invoices such services. The standstill clause covers adequately defined categories, including strictly business expenditure. Confirms that pre-accession blocks on deduction survive even where the expenditure is wholly business related and is on-charged, provided the category is defined by reference to the nature of the services. Relevant to advisers in Poland and other later acceding States with sectoral deduction blocks, and to groups that recharge hotel and catering costs internally.

C-201/18 Mydibel

Judgment · 27 March 2019 · Belgium

Adjustment of input tax on a sale and lease back of buildings

Subject to the national court's verification of the facts and national law, no adjustment is required. Creating an emphyteutic right not subject to VAT is not in itself a change in the factors determining the deduction, and where the emphyteutic right and the leaseback are so closely linked as to form a single transaction, no supply of goods occurs because the institutions cannot dispose of the buildings as owner. Had adjustment been due, it would nevertheless respect neutrality and equal treatment. Relevant to businesses using sale and lease back of real estate as a financing tool, and to their lenders and lessors.

C-434/17 Human Operator

Judgment · 13 February 2019 · Hungary

Retroactive application of a derogation authorising reverse charge

A Member State may not apply the derogating measure before the Council decision has been notified to it. Under Article 297(2) TFEU the decision took effect on notification, and legal certainty precludes retroactivity absent an express provision. The Member State's stated wish, and the Commission's awareness that it had already begun applying the measure, are irrelevant. For the earlier period the general rule in Article 193 applies, is unconditional and sufficiently precise, and can be relied on directly. The suppliers, not the recipients, were liable. Relevant to businesses in Member States that jump the gun on Article 395 derogations, particularly labour supply, staffing and construction sectors.

C-165/17 Morgan Stanley & Co International

Judgment · 24 January 2019 · France

Deductible proportion of a branch serving its foreign principal establishment

Branch and principal establishment are one taxable person, so internal flows are disregarded. For expenditure used exclusively for the principal establishment's transactions, the fraction's denominator is the turnover of those transactions alone. The numerator only its taxed transactions which would also give a right to deduct in the branch's Member State, including where deduction arises from an option exercised there. For the branch's general costs, the denominator covers the transactions of both establishments, the numerator the branch's taxed transactions plus those of the principal establishment meeting the same double test. Directly relevant to banks, insurers and other partly exempt groups operating through cross-border branches, and to anyone computing branch recovery rates.

C-491/18 Mennica Wrocławska

Order · 13 December 2018 · Poland

An error in describing the goods on an invoice does not defeat deduction

The Court holds that those provisions preclude such a refusal, where the taxable person supplied the authorities, before their decision, with the documents and explanations needed to determine the real subject matter of the transactions and to show that they had actually taken place. Deduction may still be refused where the right is invoked fraudulently or abusively, but the referring court had found no fraud here. A clear application of Barlis 06 and Senatex.

C-264/17 Mensing

Judgment · 29 November 2018 · Germany

Margin scheme for works of art acquired intra-Community from the artist

The option in Article 316(1)(b) is autonomous and additional to Article 314, so Member States cannot make it conditional on the Article 314 categories. The margin scheme is therefore available on resale of works of art acquired from the creator or successors in title via an exempt intra-Community supply. But a dealer invoking the Directive directly takes the scheme on the Directive's terms. He cannot combine it with deduction of the acquisition VAT precluded by Article 322(b), even if that provision is untransposed. Art dealers, galleries and auction operators buying directly from artists or their heirs in other Member States can rely on Article 316(1)(b) to apply the margin scheme on resale, notwithstanding national rules restricting it to domestic input supplies.

C-648/16 Fontana

Judgment · 21 November 2018 · Italy

Assessing VAT on turnover estimated by sector studies

No objection in principle. Article 273 leaves Member States discretion, and extrapolation from sector studies to assess additional VAT where declared and estimated revenue differ seriously is permissible. The qualification is that the studies must be correct, reliable and up to date, the discrepancy can create only a rebuttable presumption, the taxable person must be able to contest the study's accuracy and its relevance to his situation with any contrary evidence and without an excessive standard of proof, and must still exercise deduction under Title X. Verification is for the national court. Relevant wherever indirect assessment methods, standard margins, sectoral benchmarks or turnover reconstruction are used, notably in Italy but also in other Member States operating similar presumptive tools.

C-664/16 Vădan

Judgment · 21 November 2018 · Romania

Proving input tax without invoices

No deduction may be granted solely on the basis of an assessment resulting from a court-commissioned expert report where the taxable person cannot evidence the input VAT actually paid by invoices or any other document. Formal defects need not be fatal where the authorities have the information to verify the substantive conditions, but the burden of proof rests on the claimant. Objective evidence, including documents held by suppliers, is required. An expert report may supplement or reinforce such evidence, never replace it. Relevant to property developers and any taxable person reconstructing historic input tax after a retrospective registration or assessment, and to advisers arguing substance over form.

C-153/17 Volkswagen Financial Services (UK)

Judgment · 18 October 2018 · United Kingdom

Residual input tax on vehicle hire purchase, apportionment method

General costs actually incurred, at least in part, for the taxable vehicle supplies are cost components of those supplies for VAT purposes, even though the taxable person passed them on only in the exempt interest. The commercial result is irrelevant. A special method which disregards an actual and non-negligible allocation of overheads to taxable supplies cannot be more precise than the turnover key and is therefore not permitted. Banco Mais is confined to its own circumstances. Relevant to lessors, hire purchase providers and captive finance companies with agreed special methods, and to tax authorities imposing use based apportionment.

C-249/17 Ryanair

Judgment · 17 October 2018 · Ireland

Deduction of deal costs on an abortive takeover

Preparatory acts count as economic activity, so a company intending to acquire shares in order to supply the target with management services subject to VAT acts as a taxable person when it incurs the bid costs. The input VAT is deductible in full even though the intended activity never materialised and produced no taxable output. The qualification is that the exclusive reason for the expenditure must lie in the intended economic activity. If it is partly attributable to exempt or non-economic activity, deduction is only partial. Confirms that failed or partial acquisitions do not of themselves destroy recovery on deal fees, for corporate acquirers, holding companies and their M&A and VAT advisers.

C-69/17 Siemens Gamesa Renewable Energy România

Judgment · 12 September 2018 · Romania

Deduction of VAT on acquisitions made while the taxpayer was declared inactive

The Court held that the Directive precludes such a refusal where it is based on the sole ground that the acquisitions fell within the period of de-activation. Registration and notification duties under Articles 213 and 214 are formal requirements only. Deduction must be allowed provided the substantive conditions of Article 168 are met and the right is not invoked fraudulently or abusively. The date of the return or invoice is not decisive. The national court must verify that the authorities had the data needed to establish the substantive conditions. Businesses whose VAT numbers have been cancelled for non-filing, a common Romanian practice and mirrored elsewhere, can recover input VAT incurred during the inactive period once reactivated, provided the substantive conditions are shown and there is no fraud or abuse.

C-16/17 TGE Gas Engineering

Judgment · 7 August 2018 · Portugal

Head office and branch as a single taxable person for deduction

Those provisions do not permit a company and its branch to be treated as two taxable persons on that ground. A company and its branch in another Member State form a single taxable person unless the branch carries out an independent economic activity bearing its own economic risk, and holding two tax identification numbers does not change that. Deduction cannot be refused solely because one number was used to join the group and the other for the re-invoicing. The referring court must still verify that the substantive conditions in Article 168(a) are met. Useful where a non-resident registers twice in the same Member State, first for an isolated transaction and later as a branch, and the authorities treat the numbers as separate persons.

C-140/17 Gmina Ryjewo

Judgment · 25 July 2018 · Poland

Adjustment of input tax where a public body changes the use of capital goods

Adjustment is not precluded, provided the national court finds on all the facts that the body acted as a taxable person when it acquired the goods. An express declaration of intended economic use is not required. Intention may be implied, and the concept of acquisition "as a taxable person" is to be construed generously. Relevant evidence includes the dual-use nature of the property and prior VAT registration. Waterschap Zeeuws Vlaanderen is distinguished because there the body acquired the goods acting as a public authority. Public bodies and other partly non-economic actors that failed to deduct on acquisition are not automatically shut out of capital goods adjustment when property is later put to taxable use.

C-320/17 Marle Participations

Judgment · 5 July 2018 · France

Letting of a building as involvement in a subsidiary's management

Yes, letting a building to a subsidiary is "involvement in the management" and an economic activity, provided the letting is continuous, for consideration, taxed (not exempt), and there is a direct link between service and consideration. Acquisition costs are then general expenditure, deductible in full. Where the holding company involves itself in only some subsidiaries, the costs are only partly general expenditure and deduction must be apportioned. Turnover from the lettings and dividend income are irrelevant to the extent of deduction. Confirms the list of qualifying management services is not exhaustive.

C-459/17 SGI and Valériane

Judgment · 27 June 2018 · France

Deduction where no actual supply took place

It is sufficient for the authorities to establish that the transactions covered by the invoice were not actually carried out. The right to deduct arises only when the tax becomes chargeable, that is on actual delivery, and does not extend to tax due merely because it appears on an invoice. The good or bad faith of the recipient is irrelevant to whether a supply occurred. The concept of supply is objective. Stroy trans and LVK concerned different facts, where non-delivery had not been established. A clear separation of two lines of case law.

C-660/16 Kollroß and Wirtl

Judgment · 31 May 2018 · Germany

Input VAT on advance payments for goods never delivered

Deduction cannot be refused where the advance was paid and received and, at that time, all relevant information about the future supply was known to the buyer and the supply appeared certain. An unfixed delivery date does not create uncertainty. Deduction may be refused if objective evidence shows the buyer knew or should reasonably have known the supply was uncertain. Articles 185 and 186 do not preclude national rules making adjustment conditional on the supplier refunding the advance. Advance payment deductions are tested at the moment of payment, so later non delivery through supplier fraud or insolvency does not retrospectively destroy the right where the goods and price were identified. Relevant to plant and equipment purchasers, prepayment arrangements generally, and any adviser handling failed supplier claims.

C-81/17 Zabrus Siret

Judgment · 26 April 2018 · Romania

Correcting VAT returns for periods already audited

Those provisions and principles preclude such legislation. Where an inspection follows shortly after filing, the shortened window makes deduction impossible or excessively difficult. Refusal of deduction for a remediable formal failure, absent evasion or loss to the exchequer, is disproportionate. Legal certainty cannot be invoked by the authorities here, since the system also permits correction on their initiative and reopening on new information, so it serves the efficiency of inspections rather than taxpayers' rights. Fatorie distinguished. Member States may instead impose administrative fines on negligent taxpayers. Member States may keep a limitation period for claiming deduction, but cannot truncate it by treating a closed audit as a bar to taxpayer-initiated corrections.

C-8/17 Biosafe - Indústria de Reciclagens

Judgment · 12 April 2018 · Portugal

Start of the deduction period for additional VAT charged on rectified invoices

Those provisions and the principle of fiscal neutrality preclude such legislation. Where the customer held no rectifying documents and did not know additional VAT was due, exercise of the right to deduct was objectively impossible before the adjustment, so a period running from the initial invoices cannot bar it. That depends on the customer having shown no lack of diligence and on the absence of abuse or fraudulent collusion, which national courts assess. The second question did not require an answer. Suppliers who face a rate reclassification on assessment and pass the additional tax down the chain can no longer be met with the argument that the customer's deduction window closed years ago.

C-533/16 Volkswagen

Judgment · 21 March 2018 · Slovakia

Start of the limitation period for refunds where VAT is invoiced years late

EU law precludes a Member State from refusing a refund on the ground that a limitation period running from the date of supply had expired, where the VAT was charged to and paid by the taxable person only several years after the supply. The right arises when the tax becomes chargeable but is exercisable only once an invoice is held. The qualification is that this applies where the claimant showed no lack of diligence and there was no abuse, fraudulent collusion or risk of non-payment. Relevant to non-established businesses making Directive 2008/9 claims and to any taxable person receiving late corrective invoices after a supplier reclassifies an exempt transaction as taxable.

C-387/16 Nidera

Judgment · 28 February 2018 · Lithuania

Reduction of default interest on late VAT refunds

Article 183, read with fiscal neutrality, precludes such a reduction. Interest merely compensates unavailability of funds, so neither its size relative to the principal nor the length of the delay can justify cutting it, and a refusal later shown to be unlawful is no different from ordinary administrative delay. Member States may set a flat rate, which by nature may exceed or fall short of actual loss, but having chosen a flat rate, they cannot then substitute compensation for proven actual loss. Relevant to any business pursuing repayment interest where a Member State has withheld a VAT credit pending inspection or on a ground later found contrary to EU law.

C-672/16 IMOFLORESMIRA - INVESTIMENTOS IMOBILIÁRIOS

Judgment · 28 February 2018 · Portugal

Adjustment of input tax on vacant property held for taxable letting

Those provisions preclude such legislation. Status as a taxable person and an accrued right of deduction cannot be withdrawn retroactively because, for reasons beyond the taxable person's control, the property was not actually used for taxed transactions. Vacancy after termination of a lease is not a change in the factors under Article 185 where the intention to let taxably persists and steps are taken to that end. The qualification is that authorities may still recover deductions retrospectively in cases of fraud or abuse. No limitation of temporal effects. Relevant to property investors and developers in Member States operating an option to tax, and to their advisers dealing with clawback rules keyed to periods of vacancy.

C-628/16 Kreuzmayr

Judgment · 21 February 2018 · Austria

Ascribing the transport in a chain supply and deduction of wrongly invoiced VAT

The transport is ascribed to the second supply where the final purchaser obtained the right to dispose of the goods as owner before the transport began. Article 32 therefore applies to that second supply. The first supplier's misinformed classification and the intermediary's destination-State VAT number are irrelevant, because both the intermediary and the final purchaser knew the objective facts. VAT due only because it appears on an invoice is not deductible, and legitimate expectations cannot be invoked against a supplier. Recovery lies against the invoicing party under national law. Confirms that chain-transaction analysis rests on objective evidence known to the intermediary and final purchaser, not on the first supplier's treatment or the VAT number quoted. Relevant to commodity and fuel traders, distribution chains using collection numbers and ex works terms, and advisers reviewing invoicing positions in triangular sales.

C-305/16 Avon Cosmetics

Judgment · 14 December 2017 · United Kingdom

Direct selling through unregistered resellers and the scope of an Article 27 derogation

The derogation is valid and is not precluded by Articles 17 and 27, even though it makes no allowance for input VAT on demonstration items borne by the unregistered resellers. The derogation touches only the taxable amount. The deduction rules remain intact, and non-taxable resellers simply have no right to deduct. Giving credit would itself be an unauthorised derogation from Article 17(2). No obligation existed to notify the Commission of that point. Direct selling groups operating under open market value directions cannot claw back the sticking VAT suffered by their unregistered representatives on demonstration items or third party purchases.

C-374/16 Geissel

Judgment · 15 November 2017 · Germany

Meaning of "address" on an invoice for input tax deduction

Articles 168(a) and 178(a), read with Article 226(5), preclude national legislation conditioning deduction on the invoice stating the address where the issuer carries out its economic activity. "Address" bears its ordinary broad meaning and covers any address, including a letterbox address, at which the issuer can be contacted. Identification of the issuer, principally via name and VAT identification number, is the purpose. The good faith questions were not answered. Member States cannot add invoice content requirements beyond Article 226, and cannot refuse deduction merely because the supplier's stated address is a postal or registered office address with no activity there. Relevant to any business trading with suppliers operating remotely, online or without business premises, and to German taxpayers whose deductions were denied on this basis.

C-101/16 Paper Consult

Judgment · 19 October 2017 · Romania

Deduction refused because the supplier was declared an inactive taxpayer

The Directive precludes such rules where the refusal is systematic and final and leaves the customer no opportunity to show that there was no evasion or loss of tax revenue. Requiring a trader to make the straightforward check of the published list is a legitimate and proportionate anti-fraud measure. Failure to file returns is indicative of evasion but does not prove it. No limitation of temporal effects. The Romanian authorities could not claim good faith.

C-132/16 Iberdrola Inmobiliaria Real Estate Investments

Judgment · 14 September 2017 · Bulgaria

Deduction on works to infrastructure owned by a third party

Deduction is available where there is a direct and immediate link with the taxable person's taxed output transactions, and the free benefit to the third party does not defeat it. Two qualifications: the works must not exceed what is necessary to enable the taxable person's taxable output transactions, and their cost must be included in the price of those transactions. If the works go further, the link is partially broken and deduction is limited to the objectively necessary part. Article 26 was not engaged. Confirms that a blanket national denial of deduction because a supply is free of charge, or because the improved asset belongs to someone else, cannot stand.

C-254/16 Glencore Agriculture Hungary

Judgment · 6 July 2017 · Hungary

Default interest where a VAT refund is delayed by a tax investigation

EU law precludes such legislation. The refund period may be extended for an investigation, but only so far as necessary to complete it. If its duration is excessive and not attributable wholly to the taxable person, interest cannot be refused. A trader who genuinely obstructed the procedure cannot claim interest for the delay he caused, so the portion of the delay attributable to his conduct must be identified. National courts must interpret domestic law accordingly or disapply conflicting provisions. Relevant to any business in a repayment position facing a protracted verification, particularly in Member States where interest is switched off by a penalty or by the mere opening of an audit.

C-38/16 Compass Contract Services

Judgment · 14 June 2017 · United Kingdom

Different transitional limitation periods for repayment and deduction claims

The Court held that the principles do not preclude such legislation. The right to repayment of overpaid VAT derives from general EU law and neutralises a wrongly imposed burden. The right to deduct is inherent in the VAT system and presupposes tax actually due. The two are not comparable, so equal treatment permits different transitional dates. Neutrality was not engaged (no differing treatment of competing traders), and a three-year period with non-retroactive transitional arrangements is reasonable. Confirms that overpayment claims and input tax claims are legally distinct for limitation purposes, so a taxpayer cannot borrow the more generous cut-off applying to the other category.

C-274/15 Commission v Luxembourg

Judgment · 4 May 2017 · Luxembourg

Cost sharing groups, scope of the exemption and members' deduction rights

Luxembourg failed to fulfil its obligations on all three counts. The exemption covers only services directly necessary for members' exempt or non-taxable activities. Groups whose members also make taxable supplies may still use it, but only for that part. The group is a taxable person separate from its members. It, not they, may deduct, and deduction requires an invoice naming the claimant. Cost allocations by a member acting in his own name on the group's behalf are within the scope of VAT under the commissionaire fictions. Relevant to cost sharing structures in financial services, insurance, healthcare and the public sector, particularly in Luxembourg.

C-564/15 Farkas

Judgment · 26 April 2017 · Hungary

Reverse charge applied to the wrong transaction, deduction and penalty

Article 199(1)(g) applies only to immovable property sold by a judgment debtor in a compulsory sale. Deduction of VAT that was not due may be refused even though the seller paid it to the Treasury. The purchaser must seek reimbursement from the seller. But where that is impossible or excessively difficult, notably on the seller's insolvency, he must be able to claim directly from the tax authority. A 50% penalty for a purely administrative error causing no revenue loss appears disproportionate, subject to the national court's assessment. Confirms that domestic reverse charges cannot be extended beyond the categories listed in Article 199 without an Article 395 derogation, which is where national insolvency and auction regimes are exposed.

C-28/16 MVM

Order · 12 January 2017 · Hungary

Deduction by a holding company managing subsidiaries free of charge

Ruling by reasoned order under Article 99, the Court held that involvement in managing subsidiaries without any remuneration is not an economic activity, so no deduction arises for services relating to transactions outside the Directive. Deduction as general overheads was not excluded in principle, but the referring court must verify the direct and immediate link with the leasing activity, which the Court thought difficult to envisage. Later charging of a margin (from 2015) cannot revive deduction for 2008 to 2010 costs. Confirms that active holding status depends on actually supplying services for consideration, not on de facto management.

C-446/15 Signum Alfa Sped

Order · 15 December 2016 · Hungary

Doubts about who really performed the service do not by themselves defeat deduction

The Court holds that the directive precludes that practice, unless it is established on the basis of objective evidence, and without requiring of the taxable person checks which are not his responsibility, that he knew or should have known that the services were connected with VAT fraud. That is for the referring court to verify. The unreliability of the invoice issuer is not by itself a sufficient ground. A short order that matters because of how common the practice was.

C-516/14 Barlis 06 - Investimentos Imobiliários e Turísticos

Judgment · 15 September 2016 · Portugal

Invoice descriptions and refusal of deduction

"Legal services rendered from [a date] until the present date" does not a priori meet Article 226(6). Wording without any start date fails both points 6 and 7, since for supplies giving rise to successive statements of account the period must appear. Verification is for the national court. Deduction cannot be refused solely on those formal defects where the authorities have all the information to check the substantive conditions. They must consider additional information supplied, and may still impose proportionate penalties. Relevant to anyone facing deduction denials based on thin invoice narratives, and to professional firms billing periodic fees.

C-518/14 Senatex

Judgment · 15 September 2016 · Germany

Retroactive effect of invoice correction

Those provisions preclude such legislation. The correction has retroactive effect and the deduction belongs to the year the original invoice was drawn up. Holding a compliant invoice is a formal, not substantive, condition, and the trader here already held invoices and had paid the input VAT. Member States may penalise formal breaches under Article 273, but by fines proportionate to the offence, not by postponing deduction and charging late payment interest regardless of the circumstances. Removes the interest exposure that flowed from ex nunc correction rules where the only defect is a missing mandatory invoice detail such as the supplier's VAT identification number.

C-400/15 Landkreis Potsdam-Mittelmark

Judgment · 15 September 2016 · Germany

Scope of the German 10% derogation and non-economic use

The derogation does not apply where the goods or services acquired are used more than 90% for non-economic activities falling outside the scope of VAT. "Non-business purposes" bears its Sixth Directive meaning. Use for purposes other than the business, which may be taxed, is distinct from non-economic activity, which is outside the system altogether. Excluding deduction where economic use is below 10% breaches fiscal neutrality. The earlier interpretation applies retroactively, so no different reading applies before 12-02-2009. Public bodies and other entities in Germany with mixed economic and non-economic activity can rely on the ruling to claim a proportional deduction for the economic part, however small, since the 10% floor in Paragraph 15(1) UStG cannot be applied to non-economic use.

C-332/15 Astone

Judgment · 28 July 2016 · Italy

Deduction refused where formal obligations are fraudulently ignored

The Directive precludes neither of the two national rules. A limitation period is compatible provided the principles of equivalence and effectiveness are respected. A two year period does not in itself make deduction impossible or excessively difficult. Formal breaches normally cannot defeat deduction where the substantive conditions are met, but wholesale non-compliance (no return, no accounts, no registration, no payment) may itself constitute the simplest form of evasion, and deduction may then be refused. Whether fraud is established is for the national court, on objective evidence. Confirms that the Ecotrade line protecting substance over form has a limit. Relevant to advisers handling Italian audits and criminal thresholds, and generally to disputes where late or unrecorded purchase invoices are produced retrospectively.

C-267/15 Gemeente Woerden

Judgment · 22 June 2016 · Netherlands

Full deduction where a building is sold below cost price

The taxable person may deduct all the input VAT on construction. Article 168 imposes only two conditions: the inputs must be supplied by another taxable person and used by the taxable person for its own taxed transactions. The sale for consideration was such a transaction, so the purchaser's subsequent use, including free use by third parties, is irrelevant. A supply price below cost does not restrict deduction proportionately, unless the price is purely symbolic. Confirms that a supplier's deduction right is not policed through the recipient's use, which matters for municipalities and other public bodies transferring schools, sports halls and cultural buildings to foundations at below cost, and for group structures generally.

C-186/15 Kreissparkasse Wiedenbrück

Judgment · 16 June 2016 · Germany

Rounding up the deductible proportion under a derogating method

Member States need not apply the rounding-up rule in Article 175(1) where the deductible proportion is calculated under a derogating method in Article 173(2). The point of those derogations is greater accuracy, so States may adopt their own or no rounding rule. On adjustment, the rounding-up rule must be applied only if it was in fact applied in determining the initial deduction. Continuity with Royal Bank of Scotland under the Sixth Directive confirmed. Confirms that businesses using a use-based or sectorised apportionment imposed or permitted by national law cannot import the Directive's round-up-to-the-next-whole-number rule where domestic law does not provide it.

C-332/14 Wolfgang und Dr. Wilfried Rey Grundstücksgemeinschaft

Judgment · 9 June 2016 · Germany

Change of partial exemption method and adjustment of deductions on mixed-use buildings

Member States are not obliged to require prior direct attribution of construction, acquisition, use, conservation or maintenance costs where such attribution is difficult in practice. The residual amount may then be apportioned by turnover, or by floor area if that gives a more precise result (it need not be the most precise possible). Article 20 requires adjustment of earlier deductions when a departing allocation key is adopted during the adjustment period. Legal certainty and legitimate expectations do not preclude this, even absent express adjustment or transitional rules. Confirms that a mid-period change of partial exemption method triggers adjustment for capital goods, including immovable property, and that taxpayers cannot rely on prior acceptance of a turnover key, even one endorsed by a supreme court, or on the absence of transitional rules. Relevant to property developers and landlords with mixed taxable and exempt lettings, and to advisers on sectorised or floor-area methods.

C-126/14 Sveda

Judgment · 22 October 2015 · Lithuania

Deduction on assets provided free to the public as a means of attracting customers

The input VAT on those capital goods is deductible. A person incurring investment expenditure with an intention, confirmed by objective evidence, of carrying out economic activity acts as a taxable person, and the immediate provision of the assets to the public free of charge neither exempts nor takes the transaction outside VAT. The link may be with a particular output transaction or with the economic activity as a whole. Establishing that link on objective evidence is for the national court. The subsidy condition and adjustment periods do not affect the origin of the right. Useful for any business that constructs infrastructure open to the public without charge as a customer draw.

C-277/14 PPUH Stehcemp

Judgment · 22 October 2015 · Poland

Deduction where the invoicing supplier is treated as non-existent

The Court held that the Directive precludes such national legislation. Existence or entitlement to issue invoices is not a condition of deduction. Taxable person status is a factual test and does not depend on registration, returns, tax payment, published accounts or a fuel licence. Goods actually delivered and used for taxed transactions constitute a supply, whatever the supplier's legal power to dispose of them. Deduction may be refused only if objective evidence shows the buyer knew or should have known of a connection with VAT fraud, without imposing checks that are not its responsibility. Confirms that national "non-existent trader" tests cannot be used as a shortcut to deny input VAT.

C-108/14 Larentia + Minerva and Marenave Schiffahrt

Judgment · 16 July 2015 · Germany

Holding company input tax and the scope of VAT grouping

Where the holding company involves itself in the management of the subsidiaries, the acquisition costs are general overheads and VAT is in principle fully deductible, subject to Article 17(5) if there are exempt outputs. Where it manages only some subsidiaries, deduction is proportionate, on apportionment criteria set by Member States. Restricting grouping to subordinated legal persons is precluded unless necessary and appropriate to counter abuse or evasion, a matter for the national court. Article 4(4) has no direct effect. Confirms full deduction for genuine management holding companies, including on share issue and financing costs, and confines partial restriction to cases where some shareholdings are purely passive. Relevant to shipping, private equity and group holding structures.

C-123/14 Itales

Order · 15 July 2015 · Bulgaria

Deduction cannot be refused for unproven origin of the goods without evidence of fraud

The Court holds that they do preclude it. A tax authority may not refuse the deduction on those grounds where it has not established that the purchaser took part in VAT fraud and knew or should have known that the transaction was involved in such a fraud. The burden of showing the objective evidence of participation in fraud lies with the authority, not with the taxable person. One of the reasoned orders applying Mahageben and David and Bonik to Bulgarian practice.

C-159/14 Koela-N

Order · 15 July 2015 · Bulgaria

Deduction where goods go straight to the final customer, and what proves knowledge of fraud

Ruling by reasoned order, the Court held that the principle of fiscal neutrality precludes the authorities from denying that a supply took place, and from refusing deduction on that basis, merely because the goods travelled directly to the ultimate customer without passing through the hands of the intermediate acquirers. On the second question, it held that those two circumstances are not by themselves sufficient objective evidence of knowledge or means of knowledge, although both may be taken into account in an overall assessment of all the facts and circumstances. Two points that recur in Bulgarian and Romanian deduction disputes.

C-183/14 Salomie and Oltean

Judgment · 9 July 2015 · Romania

Retrospective taxation of property sales and deduction before VAT registration

Retrospective assessment within the limitation period is permissible provided the national rules were clear and precise and the authority's practice gave no precise assurances creating a reasonable expectation of non-taxation. A mere non-systematic practice of not taxing such sales is not enough, especially for property professionals dealing on this scale. Surcharges must be proportionate, a matter for the national court. Deduction cannot be refused or deferred merely because the taxable person was not registered when the transactions were carried out. Relevant to property developers, joint ventures and unincorporated partnerships facing reclassification as taxable persons, and to advisers arguing legitimate expectations.

C-144/13 VDP Dental Laboratory and Others

Judgment · 26 February 2015 · Netherlands

Exemption of dental prostheses on intra-Community acquisition and importation

No cherry-picking: a taxable person cannot both use a national exemption that conflicts with the Directive and deduct input tax. The choice is exemption without deduction or taxation with deduction. Articles 140(a) and (b) and 143(a) do exempt intra-Community acquisitions and final importations of dental prostheses, but only where supplied by dentists or dental technicians and where the Member State of destination has not taken the Article 370 derogation. The position in the Member State of origin is irrelevant. The reference point is always the destination Member State's treatment. Relevant to dental supply chains and to advisers handling non-conforming national exemptions generally.

C-662/13 Surgicare

Judgment · 12 February 2015 · Portugal

Mandatory national anti-abuse procedure and VAT

Directive 2006/112 does not preclude the mandatory preliminary application of such a national administrative procedure where the authorities suspect an abusive practice. The Directive says nothing about how anti-abuse measures are to be implemented, so procedural autonomy applies, subject to equivalence and effectiveness. A procedure offering a three-year limitation period, a prior hearing, the right to submit evidence, senior authorisation and reasoned decisions is favourable to the taxpayer. Compatibility with those principles is for the national court. Confirms that domestic procedural safeguards surrounding abuse-of-rights findings apply to VAT as much as to direct taxes, and that taxpayers can invoke them against assessments.

C-55/14 Régie communale autonome du stade Luc Varenne

Judgment · 22 January 2015 · Belgium

Making a football stadium available, letting or taxable service

As a general rule, no. Such an arrangement is not a letting of immovable property. The characteristic supply is the provision of access to sporting facilities in a usable condition, supported by the owner's active role (permanent on-site caretaking) and the 80% weighting of the services. The Court left the fact finding to the national court, which must assess whether all the services are genuinely necessary for football use and whether the enjoyment is merely occasional and temporary. Relevant to stadium, arena and sports facility operators, municipalities and their autonomous corporations, and anyone structuring facility use agreements with clubs.

C-590/13 Idexx Laboratories Italia

Judgment · 11 December 2014 · Italy

Formal versus substantive requirements for deduction under the reverse charge

Articles 18(1)(d) and 22 lay down formal requirements only: accounting, invoicing and return obligations. Non-compliance cannot cause loss of the right to deduct in circumstances such as these. The substantive requirements for intra-Community acquisitions flow from Article 17(2)(d). Acquisition by a taxable person liable for the VAT, goods used for taxable transactions. The position could differ if the formal breaches prevented conclusive proof that those substantive requirements were met. Here the authority had all the necessary information. Confirms and clarifies Ecotrade for businesses assessed on reverse charge acquisitions where registers or self-invoices were incomplete or missing entirely.

C-183/13 Banco Mais

Judgment · 10 July 2014 · Portugal

Turnover-based deduction proportion for motor vehicle leasing

It does not preclude it. Member States exercising the use-based option may impose a method other than turnover, provided it determines the deductible proportion more precisely and objectively reflects the actual share of expenditure attributable to taxed transactions. Restricting the fraction to the interest element is permissible where the mixed use goods and services are used primarily because of the financing and management of the leasing contracts rather than the provision of the vehicles, which the national court must verify. Relevant to banks, captive finance houses and leasing companies with mixed taxable and exempt activity, and to their advisers.

C-500/13 Gmina Międzyzdroje

Order · 5 June 2014 · Poland

Ten-year capital goods adjustment period and the refusal of a one-off adjustment

By reasoned order, the Court held that those provisions and the neutrality principle do not preclude such rules. Article 187 applies where goods initially used for non-deductible purposes are later put to deductible use, and its terms are binding. An adjustment period of at least five years (extendable to twenty for immovable property) is an essential element of the system. A ten-year period running from first use is a proper transposition, and Article 187 precludes any one-off adjustment within a single tax year. Confirms that a change of use of immovable property from non-economic or exempt to taxable activity gives access to input VAT only in annual fractions over the national adjustment period, not as an immediate lump-sum credit.

C-107/13 FIRIN

Judgment · 13 March 2014 · Bulgaria

Adjustment of VAT deducted on a prepayment where the supply never happens

Deduction taken on a prepayment invoice must be adjusted where the supply is ultimately not made. That is a change in the factors determining the deduction under Article 185(1). It is irrelevant that the supplier remains liable under Article 203 and has not refunded the advance. The two traders need not be treated alike. Article 65 does not apply at all where the chargeable event was uncertain at the time of payment, for instance in fraud. Whether the taxpayer knew or should have known is for the national court. Relevant wherever advance payments are invoiced and deducted, notably commodity trading and construction.

C-204/13 Malburg

Judgment · 13 March 2014 · Germany

Deduction by a partner on assets provided free of charge to a new partnership

The partner cannot deduct that input VAT. Making the client base available free of charge is neither a supply for consideration under Article 2(1) nor exploitation of property for continuing income under Article 4, so it falls outside VAT entirely and there is no direct and immediate link with a deductible output transaction. Polski Trawertyn is distinguished because there the contribution was an exempt transaction within the scope of VAT and neither partners nor partnership could deduct. Fiscal neutrality is an interpretative principle only and cannot extend the right of deduction. Relevant to professional partnerships and family businesses restructuring by splitting client bases, goodwill or other intangibles between partners.

C-18/13 Maks Pen

Judgment · 13 February 2014 · Bulgaria

Deduction refused where the invoiced supplier did not make the supply

Deduction may be refused on those facts only subject to a twofold condition: the facts amount to fraudulent conduct, and the authorities establish by objective evidence that the taxable person knew or should have known that the transaction was connected with that fraud. The absence of resources, missing cost entries and false signatures are not in themselves enough. Courts that may raise national law points of their own motion must do the same for the EU fraud rule. Article 273 permits accounting requirements based on international standards, but a revenue recognition test for the time of supply is precluded. Useful where an assessment rests solely on the invoiced supplier's lack of substance or defective paperwork. Relevant to businesses buying subcontracted services and to advisers handling deduction denials in Bulgaria and other Member States using substance-based challenges.

C-424/12 Fatorie

Judgment · 6 February 2014 · Romania

Deduction where reverse charge VAT is wrongly paid to the supplier

The right to deduct may be refused in those circumstances. This was not merely a formal invoicing defect. By paying the VAT to the supplier instead of accounting for it to the tax authorities, the recipient breached a substantive condition of the reverse charge regime, and deduction is available only for tax actually due. The supplier's insolvency does not alter that. The recipient's remedy is a civil claim against the supplier under national law. Legal certainty does not preclude revocation of an earlier favourable decision and reassessment with default interest within the limitation period, subject to proportionality. Confirms the limit of the Bockemühl and Ecotrade line. Relevant to construction and other domestic reverse charge sectors, where the remedy for a recipient is correction of the invoice rather than payment of tax shown in error.

C-33/13 Jagiełło

Order · 6 February 2014 · Poland

Deduction refused because the invoice issuer was a front company

The Court holds that it does preclude such a refusal, unless it is established on the basis of objective evidence, and without requiring of the taxable person checks which are not his responsibility, that he knew or should have known that the supply was connected with VAT fraud. Verifying that is for the referring court. The conduct of the invoice issuer is not, on its own, a sufficient ground for refusal. A reasoned order applying Mahageben and David and Bonik to front company arrangements.

C-319/12 MDDP

Judgment · 28 November 2013 · Poland

Exemption for commercial providers of education and the right to deduct

A profit-making aim does not itself bar exemption. Private bodies may qualify. But point (i) of Article 132(1) precludes a general exemption of all educational services irrespective of the provider's objects, which must be similar to those of public law bodies. A taxable person cannot both enjoy the exemption and deduct. It may, however, rely on the Directive to disapply the exemption, and then deduct, only where it could not objectively be regarded as having similar objects, a matter for the national court. Relevant to private training providers, language schools and vocational operators in Member States whose law exempts education by category rather than by provider status.

C-622/11 Pactor Vastgoed

Judgment · 10 October 2013 · Netherlands

Who bears the clawback on an adjusted deduction

The Directive precludes recovering sums due on adjustment of a deduction from anyone other than the taxable person who applied it. Designating the debtor is a substantive rule, not a procedural detail Member States may fix. Article 21 lists exhaustively when another person can be liable, and the joint and several liability option does not permit a separate liability. Neither Article 20(4) nor the Netherlands reverse charge derogation supports charging the purchaser for an acquisition to which it was extraneous. Relevant to property investors and developers, and to advisers on opted-to-tax land and building transfers, particularly in the Netherlands where the clawback provision was struck down.

C-388/11 Le Crédit Lyonnais

Judgment · 12 September 2013 · France

Foreign branch turnover in the partial exemption fraction

No on all three points. The deduction system rests on the territoriality of the applicable national rules. A taxable person is subject to as many deduction regimes as there are Member States in which it has fixed establishments, so turnover of EU branches cannot enter the head office's proportion. Nor can turnover of third country branches, whose supplies to non-EU customers are not treated as made by the principal establishment. "Sectors of business" means types of economic activity, not geographic areas, so no national option can permit it. Removes the FCE Bank single entity argument as a route to improving head office recovery.

C-210/11 Medicom and Maison Patrice Alard

Judgment · 18 July 2013 · Belgium

Rent-free occupation of company property by managers and the letting exemption

Without rent in money there is no letting. The exemption cannot apply, and treatment of the occupation as a benefit in kind for income tax purposes is irrelevant, since it is not shown that the managers gave up salary or that part of their work was consideration. Nor need the taxable person show any direct link between the private use and its taxable transactions. The national court must still verify, on all the evidence, whether the features of a letting are present. Confirms and extends Seeling for corporate owner-occupiers.

C-26/12 PPG Holdings

Judgment · 18 July 2013 · Netherlands

Employer's deduction of VAT on pension fund administration and asset management costs

The employer may deduct the VAT, provided a direct and immediate link is apparent from all the circumstances. Here the services were acquired solely for the purposes of the employer's taxable activity in discharging a statutory obligation, and the costs form part of its general costs, which the national court must verify. Denying deduction because of the legislative choice to separate employer and fund would breach neutrality. The exemption question did not need answering, having been covered by Wheels. Confirms that employers, not just the fund, can recover VAT on pension administration and asset management costs where they contract for and bear those costs and the costs sit in general overheads. Relevant to any employer operating a separate trustee or foundation pension vehicle, and to advisers reviewing historic assessments and contracting arrangements.

C-78/12 Evita-K

Judgment · 18 July 2013 · Bulgaria

Proof of a supply of goods and formal ownership of livestock

The concept of a supply of goods, and the evidence that one actually took place, are independent of how ownership was acquired. The national court must assess all facts overall, and may look at prior and subsequent transactions and accompanying certificates. Authorities cannot require documents from the issuer showing ear tags. Article 242 does not import IAS 41. Article 226(6) does not require ear tags on invoices. Article 185(1) permits adjustment only where a right to deduct existed initially under Article 168(a). Useful to advisers dealing with livestock, agri-commodity and other fungible goods trades where tax authorities equate defective sector paperwork with a non-existent supply.

C-124/12 AES-3C Maritza East 1

Judgment · 18 July 2013 · Bulgaria

Deduction on costs for hired-in staff and the standstill clause

Deduction cannot be refused merely because the workers are employed by another entity. The link required by Article 168(a) is purely economic, and the legal relationship with the persons working in the undertaking is irrelevant, provided the costs have a direct and immediate link with the taxable person's general costs. The standstill clause does not permit a new exclusion for supplies free of charge introduced on accession. The national court must read domestic law consistently or disapply it. Relevant to any business operating with hired-in, agency or seconded personnel, particularly industrial sites where transport, PPE and workwear are legally required.

C-572/11 Menidzherski biznes reshenia

Order · 4 July 2013 · Bulgaria

No deduction on invoices for transactions that never took place, even if the issuer paid the tax

The Court holds that they do not preclude such a refusal. The right of deduction is linked to the actual carrying out of the supply, and it does not extend to tax which is due solely because it appears on an invoice under Article 203. That the issuer paid the tax, so that no loss of revenue arises, does not change the position. The referring court must make a global assessment of the facts. The order marks the boundary of the substance over form case law.

C-219/12 Finanzamt Freistadt Rohrbach Urfahr

Judgment · 20 June 2013 · Austria

Domestic solar panels as an economic activity

The operation of such an installation is an economic activity. Electricity fed into the grid for remuneration under a contract of indefinite duration is the exploitation of property for income on a continuing basis, and profit motive is irrelevant. The supply to the grid is a separate activity from taking electricity back for household needs, so the ratio of production to private consumption is immaterial. The operator is a taxable person and, the installation being used exclusively for taxed outputs, input tax is deductible. Confirms that private individuals with grid-connected solar installations are taxable persons where all output is sold on a continuing basis, opening full input VAT recovery on the installation and requiring output VAT on feed-in supplies, subject to national small-business thresholds.

C-444/12 Hardimpex

Order · 16 May 2013 · Hungary

An upstream irregularity does not defeat deduction absent proof of knowledge

The Court holds that it does preclude that refusal, where it has not been established to the requisite legal standard that the taxable person knew or should have known of the irregularity. The mere fact that the company did not check where the goods came from cannot be a ground for refusing deduction. Subject to the verifications for the referring court, no such knowledge had been shown. One of the Hungarian orders that consolidated the Mahageben and David line into settled practice.

C-271/12 Petroma Transports and Others

Judgment · 8 May 2013 · Belgium

Late correction of incomplete invoices and the right to deduct

Correction of defective invoices is not prohibited, but the decisive point is timing. Where the supplementary information reaches the authority only after the refusal decision has been adopted, deduction may be refused. Member States could, under the Sixth Directive, require particulars beyond the listed minimum, provided these are limited to what is necessary and do not make deduction practically impossible. Neutrality gives no right to a refund to the supplier. The services were actually performed, so the VAT was due and correctly paid. Confirms that the Pannon Gép window for regularising invoices closes when the authority takes its decision. Relevant to intra-group service and management charge arrangements, where lump sum invoicing without hours or unit rates remains a common audit target.

C-138/12 Rusedespred

Judgment · 11 April 2013 · Bulgaria

Refund of VAT invoiced in error where the customer's deduction has been definitively refused

Neutrality precludes refusal of the refund in those circumstances. Article 203 exists to remove the risk of loss of tax revenue. Where deduction has been definitively refused that risk is wholly eliminated, and conditioning the refund on a correction that national law makes impossible goes beyond what is necessary. The obligation is unconditional and sufficiently precise, so the taxable person may rely on the principle against the national provision. Suppliers who wrongly charge VAT on exempt supplies, notably on older buildings and associated works, have a route to recovery once the customer's deduction has been finally refused, even if the domestic correction or credit note mechanism has by then closed.

C-563/11 Forvards V

Order · 28 February 2013 · Latvia

Deduction and an invoice from a company treated as fictitious

Ruling by reasoned order, the Court held that Article 17(2)(a) does preclude such a refusal, unless it is established on the basis of objective evidence, and without requiring of the recipient checks which are not its responsibility, that the recipient knew or should have known that the transaction was connected with VAT evasion. Whether that is so is for the referring court to verify. Squarely within the Mahagében and Dávid line.

C-104/12 Becker

Judgment · 21 February 2013 · Germany

Deduction of criminal defence costs of company directors

The link depends on the objective content of the goods or services acquired. Lawyers' services aimed at avoiding criminal penalties against natural persons who are managing directors of a taxable undertaking give that undertaking no right to deduct. The exclusive reason for the transaction may be taken into account, but only as a criterion of objective content. A mere causal connection with the taxable activity is not a direct and immediate link. The second question was not answered. Companies bearing the legal costs of directors' or employees' personal criminal defence cannot deduct the VAT, even where the alleged conduct arose entirely in the course of the business, the company is contractually the client and the invoice is addressed to it. Relevant to construction, procurement and any sector facing bribery or competition investigations, and to VAT group controlling entities.

C-642/11 Stroy trans

Judgment · 31 January 2013 · Bulgaria

Asymmetry between invoice issuer's liability and recipient's deduction

VAT entered on an invoice is payable by the issuer regardless of whether a taxable transaction exists, and no acknowledgement of a real transaction can be inferred from the mere absence of correction in a notice addressed to the issuer. Refusal of deduction to the recipient is not precluded by neutrality, proportionality or legitimate expectations. But where non-performance rests on fraud or irregularities of the issuer or upstream, it must be shown on objective factors that the recipient knew or should have known of the connection with fraud. Confirms that a supplier's unadjusted VAT assessment is only one evidential factor, not proof of supply, so recipients cannot rely on the tax treatment of their supplier to secure deduction. Relevant to fuel, commodity and other chain trading where authorities allege missing supplies from documentary gaps upstream.

C-643/11 LVK

Judgment · 31 January 2013 · Bulgaria

Asymmetric treatment of issuer and recipient of an invoice where no supply took place

VAT entered on an invoice is payable under Article 203 regardless of whether a taxable transaction exists, and no inference of acceptance arises from the authorities leaving the issuer's declaration unadjusted. Issuer and recipient are not in comparable situations. Deduction may therefore be refused for want of an actual transaction. But where the finding of no supply rests on fraud or irregularities by the issuer or upstream, the authorities must establish on objective factors that the recipient knew or should have known of the fraud, without demanding checks that are not his responsibility. Customers cannot defend a deduction simply by pointing to the supplier having declared and been assessed on the same VAT. Relevant to agricultural, commodity and other chain-supply trades facing missing-trader challenges.

C-560/11 Debiasi

Order · 13 December 2012 · Italy

Input tax on exempt medical activities is not deductible and enters the pro rata

The Court holds that those provisions do not preclude such legislation. Denying deduction for inputs used in exempt transactions is the ordinary consequence of the system, since deduction is available only in so far as goods and services are used for taxed transactions, and including exempt supplies in the denominator of the fraction is exactly what Article 19 prescribes. A confirmation of orthodoxy rather than a development.

C-285/11 Bonik

Judgment · 6 December 2012 · Bulgaria

Deduction refused because upstream supplies could not be traced

Deduction may not be refused on the ground that, in view of fraud or irregularities committed upstream or downstream, the supply is deemed not to have taken place, unless it is established on objective evidence that the taxable person knew or should have known that his transaction was connected with VAT fraud in the chain. The national court must still verify that the supplies were actually made and the goods used for taxed output transactions, and whether the authorities have produced that objective evidence. Confirms Mahagében and Dávid for Bulgarian-style "absence of actual supply" reasoning.

C-257/11 Gran Via Moineşti

Judgment · 29 November 2012 · Romania

Deduction on buildings acquired for demolition

The purchaser has the right to deduct the VAT on the buildings. The acquisition is a preparatory act in its property development activity, and the land continues to be used for taxed transactions, so replacing dilapidated structures with modern ones does not break the direct link. Demolition is not a change in the factors determining the deduction under Article 185(1), because it was intended from the outset. No adjustment is therefore due, absent fraud or abuse. Confirms for developers and their advisers that VAT on a demolition purchase (land plus existing buildings) is fully deductible where the intended taxed use of the site is evidenced objectively, here by the transferred demolition permit, the actual demolition works and the planning certificate.

C-511/10 BLC Baumarkt

Judgment · 8 November 2012 · Germany

Floor area rather than turnover as the partial exemption method for a mixed-use building

It does, but only for a given transaction and only on condition that the alternative method (here, floor area) guarantees a more precise determination of the deductible proportion than the turnover method. A general derogation from the turnover rule across the board would be contrary to the Directive. Member States must respect fiscal neutrality and proportionality, and the national court must verify that the precision condition is met. Relevant to property developers and landlords with mixed taxable and exempt lettings, and to anyone advising on special methods.

C-234/11 TETS Haskovo

Judgment · 18 October 2012 · Bulgaria

Adjustment of deduction on demolition of buildings for modernisation

Article 185(1) does not require adjustment where buildings intended for energy production are destroyed and replaced by more modern buildings fulfilling the same purpose. Acquisition followed by demolition for modernisation is a series of linked transactions serving taxable output transactions, so the direct link with the taxable economic activity is unbroken. That applies all the more where destruction was only partial, new buildings were erected on the same land, and demolition waste was sold under VAT. The remaining questions, including on Article 185(2), were not answered. Useful for energy, utilities, industrial and property developers demolishing acquired buildings as part of a redevelopment or modernisation programme.

C-550/11 PIGI

Judgment · 4 October 2012 · Bulgaria

Adjustment of input tax on goods lost to theft

Article 185(2) does not preclude such rules. Theft removes the goods from use in taxable output transactions and so is in principle a change requiring adjustment. The exemption from adjustment in the first subparagraph is optional, and a Member State that has exercised the option may require adjustment in all cases of theft, irrespective of whether the circumstances are elucidated or the perpetrator identified or convicted. Member States may implement the option using equivalent wording, such as an established "shortfall", provided it reflects the Directive's objective. Force majeure was not at issue. Confirms that businesses cannot assume stolen stock leaves input tax untouched. Relevant to retail, wholesale, tobacco, drinks and any stock-holding business suffering shrinkage or unexplained shortfalls, and to advisers reviewing stocktake write-offs.

C-324/11 Tóth

Judgment · 6 September 2012 · Hungary

Deduction where the subcontractor's trading licence was withdrawn and its workers undeclared

No refusal on any of those grounds alone. Status as a taxable person under Article 9(1) turns on facts, not on any licence or registration, so deduction stands where the invoice carries the Article 226 particulars. Undeclared workers by the supplier, and the customer's failure to check the workforce, do not of themselves show knowledge of fraud absent material grounding suspicion. Where the authority produces specific evidence of fraud, the national court may examine whether the issuer performed the supply, but refusal still requires objective evidence of knowledge. Confirms and extends Mahagében and Dávid to services and to withdrawn trading licences.

C-496/11 Portugal Telecom

Judgment · 6 September 2012 · Portugal

Input VAT recovery by a holding company that on-charges services to subsidiaries

Full deduction under Article 17(2) is available where the inputs have a direct and immediate link with output economic transactions carrying a right to deduct, and that right cannot be restricted merely because national law treats those taxed supplies as ancillary to the main activity. If the inputs serve both deductible and non-deductible economic transactions, Article 17(5) pro rata methods may be imposed. If they serve economic and non-economic activities, Article 17(5) does not apply. Member States set an objective apportionment method. Confirms that a holding company that intervenes in the management of its subsidiaries for consideration is entitled to full recovery on costs re-invoiced to them, and that the statutory object of the company is not a basis for imposing a turnover pro rata. Relevant to Portuguese SGPS and to holding and group service companies generally, and to advisers resisting blanket pro rata assessments.

C-334/10 X

Judgment · 19 July 2012 · Netherlands

Deduction on permanent alterations made for temporary private use

Deduction is available on the alteration expenditure notwithstanding that the alterations were made with temporary private use in mind, and irrespective of whether VAT was charged and deducted on acquiring the underlying item. The alterations may constitute a separate capital item, and initial private followed by business use is mixed use. But deduction depends on the national court finding, on objective evidence (nature of the goods, later business use, lifespan), an intention to use the item for business purposes. Private use is then taxed under Article 6(2)(a), not (b). Relevant wherever fit-out or conversion works on business premises serve a temporary private or non-business purpose before reverting to business use, including owner-managed businesses, farms and mixed residential/commercial property.

C-160/11 Bawaria Motors

Judgment · 19 July 2012 · Poland

Margin scheme where the previous supplier had only partial input VAT deduction

The margin scheme is not available on such a resale. Article 314 lists exhaustively and must be construed narrowly. The exemption in Article 136(b) covers only goods on whose acquisition VAT was not deductible at all. A national restriction limiting the deductible amount is not non-deductibility. What the listed cases share is that the supplier bore the input tax in full. Resulting partial double taxation is for the national legislature to remedy, not a ground for a different reading. For motor dealers and other second-hand goods traders what decides the point is the previous owner's deduction position, not merely whether the incoming invoice is marked exempt.

C-284/11 EMS-Bulgaria Transport

Judgment · 12 July 2012 · Bulgaria

Limitation period for exercising the right to deduct on late-accounted intra-Community acquisitions

Limitation periods for exercising the right to deduct are compatible with those articles provided they do not make exercise of the right impossible or excessively difficult in practice. The national court assesses this, taking account of a later substantial extension of the period and of the time taken by a registration procedure that had to be completed inside it. Fiscal neutrality precludes refusal of deduction as a penalty for late accounting. Default interest is permitted if proportionate, and not if it equals the deductible tax. Confirms that non-registration cannot defeat deduction where the substantive conditions are met, registration being a formal verification requirement. Relevant to businesses that account for acquisition or reverse charge VAT late, and to advisers challenging domestic deduction windows.

C-80/11 Mahagében and Dávid

Judgment · 21 June 2012 · Hungary

Refusal of deduction for the supplier's misconduct and the buyer's duty of enquiry

The Directive precludes both national practices. Where the substantive and formal conditions for deduction are met, refusal requires the authority to establish, on objective evidence, that the taxable person knew or ought to have known that the transaction was connected with fraud by the invoice issuer or an earlier trader in the chain. No strict liability. General verification duties cannot be imposed where the trader holds no material giving grounds to suspect irregularities. Where there are such indications, enquiries may reasonably be required. The authority, not the taxpayer, bears the burden of proving knowledge or means of knowledge, and cannot shift its investigative function onto customers.

C-621/10 Balkan and Sea Properties and Provadinvest

Judgment · 26 April 2012 · Bulgaria

Open market value as the taxable amount for supplies between connected persons

The conditions in Article 80(1) are exhaustive. National legislation may not rely on that provision to make open market value the taxable amount outside the listed cases, in particular where the taxable person has a full right of deduction, since no evasion or avoidance risk arises there. Member States remain free to impose other anti-evasion obligations under Article 273. Article 80(1) may be relied on directly, and incompatible national provisions must be disapplied, leaving Article 73 to apply. Member States operating blanket connected-party valuation rules cannot apply them where both parties have full deduction rights.

C-436/10 BLM

Judgment · 29 March 2012 · Belgium

Private use of company property by staff and the letting exemption

The Court held that those provisions preclude such national legislation where the characteristics of a letting are absent. Seeling is not confined to natural persons. Article 6(2)(a) expressly covers use by a taxable person's staff and draws no distinction by legal form. Without rent, an agreed duration of enjoyment, a right of occupation and the exclusion of third parties, there is no exempt letting. It remains for the national court to verify whether a letting exists on the facts. Member States cannot deny deduction on mixed use immovable property held by companies by recharacterising rent free occupation by directors or employees as an exempt letting. Relevant to corporate property holdings, family companies granting usufructs, and advisers handling director accommodation.

C-153/11 Klub

Judgment · 22 March 2012 · Bulgaria

Deduction on capital goods not yet brought into use

A taxable person who acquires capital goods acting as such and allocates them to the assets of the business may deduct the VAT in the tax period in which the tax became chargeable, even if the goods are not immediately used for business purposes. Whether the person acquired the goods for the purposes of his economic activity is a question of fact for the national court, assessed on all circumstances including the nature of the asset, the interval before business use and steps taken to obtain the necessary authorisations, as is any fraud or abuse. Confirms that absence of immediate use, and even absence of a permit allowing use, does not of itself defeat deduction on capital goods.

C-594/10 van Laarhoven

Judgment · 16 February 2012 · Netherlands

Flat-rate taxation of private use of business cars

Article 6(2)(a) read with Article 11A(1)(c) of the Sixth Directive precludes legislation which allows immediate full deduction on mixed use cars but then taxes private use annually on a flat-rate basis that does not reflect, proportionally, the actual extent of private use. Flat-rate methods remain permissible because Member States retain a margin of discretion, provided the outcome is proportionate to actual private use and gives the taxable person no advantage over a final consumer. The national court must test the Dutch method against that standard. Relevant to any business allocating mixed use cars wholly to business assets and to advisers dealing with private use charges.

C-25/11 Varzim Sol

Judgment · 16 February 2012 · Portugal

Untaxed subsidies cannot be forced into the pro rata for a wholly taxable sector

The Court holds that those provisions preclude it. Where a Member State allows deduction based on use, the sector in which only taxable transactions are carried out gives a full right of deduction, and untaxed subsidies cannot be brought into the denominator of a fraction for that sector. Doing so would restrict a right of deduction that the directive intends to be complete. The judgment protects the integrity of the use based method in Article 173(2).

C-118/11 Eon Aset Menidjmunt

Judgment · 16 February 2012 · Bulgaria

Deduction on leased and finance-leased cars used for home to work travel

For an ordinary lease (a supply of services), deduction requires a direct and immediate link with the economic activity, assessed at the expiry of the period to which each payment relates. Where a finance lease transfers substantially all risks and rewards, or ownership at the end, it is the acquisition of capital goods. If allocated wholly to business assets, input VAT is fully and immediately deductible, with private or staff use taxed under Article 26(1). Such national exclusions are permissible, but not where capital goods are allocated to the business. Relevant to fleet operators, leasing companies and advisers handling company car deductions.

C-504/10 Tanoarch

Judgment · 27 October 2011 · Slovakia

Deduction on assignment of a co-ownership share in an unpatented invention

A taxable person may in principle deduct input VAT on such an assignment, provided national law permits a co-inventor to assign his share. That question of national law is for the referring court. Lack of patent registration does not prevent the transaction being an economic activity, and the parties' intention to obtain a tax advantage is irrelevant to that classification. Whether the arrangement amounts to abuse of rights is a factual assessment for the national court on all the circumstances. Confirms that intangible rights transactions are judged objectively. Relevant to IP holding structures, research consortia and advisers handling deals in patent rights before grant.

C-274/10 Commission v Hungary

Judgment · 28 July 2011 · Hungary

Refund of excess input VAT conditional on payment of the supplier

Hungary infringed the Directive. Chargeability and the creation and exercise of the right of deduction are in principle independent of whether the consideration has been paid. Payment only matters in the specific cases the Directive expressly provides for, such as Article 66(b), which Hungary had not used. Payment of the supplier therefore cannot be a refund "condition" under Article 183. Carrying an excess forward over several periods is not inherently unlawful, but here it risked no refund within a reasonable period. Confirms that Member States' discretion over refund procedures under Article 183 is procedural only and cannot introduce substantive conditions bearing on the deduction itself.

C-203/10 Auto Nikolovi

Judgment · 3 March 2011 · Bulgaria

Margin scheme and goods imported by the dealer himself

The margin scheme does not apply to supplies of goods such as second-hand vehicle parts which the dealer himself imported into the EU under the normal scheme. Supply and importation are distinct, and the right to deduct import VAT removes any double taxation. Deferral of deduction under Article 320 is confined to imported works of art, collectors' items and antiques, where the dealer has a genuine option. Absent that option, no fraud risk justifies departing from immediate deduction. All three provisions have direct effect. A trader in second-hand goods importing from outside the EU applies the normal scheme to those goods and deducts the import VAT immediately under Articles 167 and 168, whether or not the goods qualify as second-hand.

C-277/09 RBS Deutschland Holdings

Judgment · 22 December 2010 · United Kingdom

Input tax deduction where a classification mismatch leaves output rentals untaxed

Deduction cannot be refused on that ground. Under Article 17(3)(a) the test is whether the right would exist had all transactions taken place in the same Member State, and it would have. Non-collection of output tax caused by divergent national categorisation does not defeat deduction, the leasing being taxable in principle and not exempt or outside scope. Nor is there abuse. The parties were legally unconnected, the transactions genuine and commercial, and taxable persons may structure activities to limit tax. Confirms that cross-border classification mismatches, particularly the goods versus services treatment of finance leases with residual value or put option arrangements, do not of themselves justify denying input tax recovery to the lessor. Relevant to leasing and asset finance groups with subsidiaries in more than one Member State, and to advisers defending Halifax challenges.

C-438/09 Dankowski

Judgment · 22 December 2010 · Poland

Deduction where the supplier is not registered for VAT

Deduction is available: the supplier's failure to declare commencement of activity under Article 22(1) cannot defeat the recipient's right under Article 17(2), provided the invoices contain all the Article 22(3)(b) particulars, in particular enough to identify the issuer and the nature of the services. A tax identification number sufficed here. Article 17(6) does not save a general exclusion of deduction covering all transactions of an unregistered supplier. Such standstill derogations must be specific and are construed strictly. Confirms that registration is a formality on the supplier's side and cannot be turned into a substantive condition for the customer's deduction where the supply is real and used for taxed outputs.

C-385/09 Nidera Handelscompagnie

Judgment · 21 October 2010 · Lithuania

Deduction denied for want of prior VAT registration

Identification under Article 214, like the notification duty in Article 213, is a formal requirement for verification purposes, not a condition constituting the right of deduction. The only formal condition under Article 178(a) is holding a compliant invoice. Where the substantive conditions are met, deduction cannot be refused merely because the person was not identified before using the goods in his taxed activity, provided he identifies himself within a reasonable period. Member States may still impose reasonable time limits and administrative penalties. Relevant to exporters and traders established in one Member State buying locally for zero-rated export or intra-Community supply, who are not obliged to register locally but must do so to recover input VAT.

C-392/09 Uszodaépítő

Judgment · 30 September 2010 · Hungary

Retroactive invoicing formalities and the right to deduct under reverse charge

They do preclude it, where the tax authority already holds all the information needed to establish that the taxable person is liable to the VAT as recipient and to verify the deductible amount. Under a reverse charge only the formalities permitted by Article 178(f) apply, so no invoice meeting the Directive's formal invoicing conditions is required, and national formalities must not go beyond what is strictly necessary to check the reverse charge. Electing into the new law does not itself affect the right to deduct. Confirms, for construction and other reverse charge sectors, that under Article 178(f) the recipient's deduction does not depend on a formally compliant invoice, and that where substantive conditions are met and the authority has the information it needs, refusal for missing formalities is unlawful.

C-395/09 Oasis East

Judgment · 30 September 2010 · Poland

Standstill clause and blanket exclusions for services from 'tax havens'

Article 17(6) does not permit a Member State to retain such legislation. The standstill clause presupposes exclusions that were lawful under the Second Directive and does not extend to general exclusions. Member States must sufficiently define the goods and services concerned. A blanket denial keyed to the supplier's place of establishment goes beyond what is authorised. Article 176 draws no different line for post-1979 accession States. The relevant date for Poland is 01-05-2004. Anti-evasion concerns do not widen the derogation. The Article 27 procedure exists for that. Taxpayers in Member States operating blanket, supplier-location-based deduction bans on reverse charge or imported services can challenge them and pursue refunds for periods from accession.

C-188/09 Profaktor Kulesza, Frankowski, Jóźwiak, Orłowski

Judgment · 29 July 2010 · Poland

Reduction of input tax deduction as a penalty for not using a cash register

The Court held that the common VAT system does not preclude a temporary restriction on the amount of deductible input tax where sales record keeping obligations are breached, provided the sanction respects proportionality, which the national court must verify. The right to deduct itself must not be rendered meaningless. A 30% withholding, preserving most of the input tax, appeared neither excessive nor inadequate. Such a measure falls under Article 22(8), not Article 27(1), and is not a turnover tax caught by Article 33. Member States may enforce cash register and accounting obligations by penalties calculated as a percentage of deductible input tax, without seeking a derogation. Relevant to retail and cash businesses across Member States operating till based reporting regimes.

C-368/09 Pannon Gép Centrum

Judgment · 15 July 2010 · Hungary

Corrected invoices and the right to deduct

Those provisions preclude such legislation or practice. Article 226 lists exhaustively the details required, and Member States cannot make deduction conditional on invoice content requirements not laid down by the Directive. Article 273 does not allow additional invoicing obligations. Nothing prohibits correcting an incorrect invoice, and no rule requires corrected invoices and cancelling credit notes to fall in the same series. The qualification is that the material conditions for deduction must be met, and the corrected invoice, containing all Article 226 details, must reach the authority before it decides. Useful for anyone facing deduction refusals founded on invoice formalities. Relevant to construction and subcontracting chains, where completion dates routinely diverge between tiers, and to advisers handling audit correspondence.

C-311/09 Commission v Poland

Judgment · 6 May 2010 · Poland

Flat-rate VAT on foreign coach operators without deduction

The Court upheld the action. By applying that flat-rate charge Poland failed to fulfil its obligations under Articles 73, 168 and 273 of the VAT Directive. The taxable amount must be the consideration actually received, and the right to deduct input tax incurred for the purposes of taxed transactions cannot be denied. The additional obligations a Member State may impose under Article 273 do not extend to displacing those two rules. A straightforward but firm statement that simplification cannot be bought at the price of the two structural elements of the system. Relevant to any national scheme that substitutes a lump sum or notional base for the real consideration, particularly where it applies only to non-established operators.

C-536/08 X and fiscale eenheid Facet-Facet Trading

Judgment · 22 April 2010 · Netherlands

No deduction of VAT on a fallback intra-Community acquisition

No immediate right of deduction. Where the goods were not actually brought into the Member State of identification, the deemed acquisition cannot be regarded as giving rise to a right of deduction under Article 17, because the goods are not used for the taxable person's taxed transactions there. The remedy is the specific corrective mechanism in the second subparagraph of Article 28b(A)(2), reducing the taxable amount once the acquisition is shown to have been taxed in the Member State of arrival, not the general deduction regime. Confirms that the fallback taxation in the identification State is a sanction-like charge with no input credit.

C-538/08 X Holding and Oracle Nederland

Judgment · 15 April 2010 · Netherlands

Standstill exclusions from deduction for staff benefits and business gifts

The categories are sufficiently defined: private means of transport, meals, drinks, accommodation, leisure activities offered to staff, and business gifts or other gratuities may all remain excluded. Member States may also restrict the exclusion, allowing deduction proportionate to business use, since that moves closer to the Directive's aim. An amendment generally narrowing an exclusion stays within the standstill even if its flat-rate mechanics could, exceptionally, produce a worse result in an individual year. Confirms that broadly worded staff-benefit and entertainment blocks survive the standstill provided they identify the nature or object of the supplies. Relevant to employers in Member States with pre-1979 blocking rules on staff catering, housing, company cars, corporate hospitality and gifts, and to advisers testing such rules.

C-483/08 Régie communale autonome du stade Luc Varenne

Order · 9 July 2009 · Belgium

Limitation for recovering wrongly deducted VAT may run from the first claim

The Court holds that Article 10 does not preclude such a rule. That provision defines the chargeable event and the chargeability of the tax. It does not govern limitation periods for the recovery of tax wrongly deducted, which in the absence of EU rules fall within the procedural autonomy of the Member States, subject to the principles of equivalence and effectiveness. Useful whenever a client argues that a national recovery period runs from an event other than the deduction claim.

C-377/08 EGN

Judgment · 2 July 2009 · Italy

Input VAT recovery on cross-border telecommunications supplies

The Court held that such supplies are "carried out abroad" within Article 17(3)(a), so the supplier may deduct or be refunded input VAT in its own Member State provided the same services would have generated a right of deduction had they been supplied domestically. For 1999 the shift of place of supply to the customer's establishment derived not from Article 9(2)(e) itself but from Council Decision 97/207 authorising Italy to derogate. Directive 1999/59 only applied from a later date. Confirms that a deemed foreign place of supply is enough to trigger recovery under Article 17(3)(a).

C-566/07 Stadeco

Judgment · 18 June 2009 · Netherlands

Correcting VAT wrongly shown on an invoice

VAT mentioned on an invoice is payable in the Member State to which that VAT relates, even if the transaction is not taxable there. The referring court must identify that Member State from all relevant circumstances (rate shown, currency, language, content and context, places of establishment, conduct of the parties). Fiscal neutrality does not in principle preclude requiring a corrected invoice where the taxable person has not itself wholly and in good time eliminated the risk of revenue loss. National law may also refuse repayment causing unjust enrichment. Confirms that liability follows the VAT shown on the invoice, not the place of supply, so incorrectly domestic-style invoicing of cross-border services creates a real debt in the Member State whose VAT is stated.

C-102/08 SALIX Grundstücks-Vermietungsgesellschaft

Judgment · 4 June 2009 · Germany

Public bodies, exempt activities treated as public authority activities and distortions of competition

Member States must make a specific, express choice to use the fourth subparagraph option. Any legislative technique will do (including delegation to the executive) provided it is binding, specific, precise, clear and reviewable by the courts. Divergent administrative practice and inference from unwritten concepts are not enough. The second subparagraph applies to significant distortions of competition harming the public body itself, not only its private competitors, but only once the activity is found to be carried out as a public authority. Relevant to landlords, developers and lessors dealing with public sector tenants, and to public bodies letting property.

C-460/07 Puffer

Judgment · 23 April 2009 · Austria

Full deduction on mixed-use buildings and the scope of the standstill clause

Articles 17(2)(a) and 6(2)(a) do not breach equal treatment. Any cash-flow advantage flows from the taxable person's status and economic activity, so different rules apply to different situations. Article 87(1) EC does not apply, since the restriction of deduction to taxed transactions derives from the Directive itself, not State intervention. The standstill clause does not cover new rules based on a different logic and new procedures, even where the outcome is equivalent and even if the legislature misread Community law. Whether an unamended parallel exclusion survives depends on its autonomy, for the national court. Confirms that a taxable person allocating a mixed-use building wholly to the business may deduct all input VAT immediately, with private use taxed under Article 6(2)(a). Relevant to property owners and advisers handling mixed-use construction, and to any challenge to grandfathered domestic input tax blocks.

C-488/07 Royal Bank of Scotland

Judgment · 18 December 2008 · United Kingdom

Rounding of the deductible proportion under special partial exemption methods

Member States are not obliged to apply the rounding rule in the second subparagraph of Article 19(1) where the deductible proportion is calculated under one of the special methods in the third subparagraph of Article 17(5), points (a) to (d). Article 19 sets out a detailed calculation rule only for the standard turnover based proportion. Member States may adopt their own rounding rules, provided they respect the principles underlying the common VAT system. The second question did not require an answer. Confirms that a special or sectoral partial exemption method can carry its own rounding convention, including rounding to decimal places rather than to the next whole percentage point. Relevant to banks, insurers and other partly exempt businesses negotiating special methods, and to tax authorities approving them.

C-95/07 Ecotrade

Judgment · 8 May 2008 · Italy

Limitation periods and formal breaches under the reverse charge

A limitation period for deduction is permissible provided the principles of equivalence and effectiveness are respected. Effectiveness is not breached merely because the authorities have longer to recover unpaid VAT, the two situations not being comparable. However, denying deduction as a penalty for breach of national formalities and of accounting and declaration obligations under the reverse charge is disproportionate where the substantive conditions are met. A proportionate fine is the appropriate sanction. Confirms that fiscal neutrality protects reverse charge deduction where the tax authority has the data needed to establish liability, so self-billing and dual register failures cannot be met with a net VAT charge plus loss of input tax. Relevant to businesses receiving cross-border services and to advisers handling Italian and other national assessments where limitation periods are asymmetric.

C-437/06 Securenta

Judgment · 13 March 2008 · Germany

Input VAT on share issue costs where economic and non-economic activities are mixed

Input VAT on capital-raising costs is deductible only to the extent the costs are attributable to the taxable person's economic activity. VAT on costs linked to activities falling outside the Directive because they are non-economic gives no right of deduction. Articles 17(5) and 19 govern only the split within economic activity. The choice of method and criteria for apportioning between economic and non-economic activity is for Member States, which must adopt a calculation objectively reflecting the actual attribution to each. An investment-based, transaction-based or other suitable criterion may be used. Confirms a two-stage apportionment for holding and investment vehicles, funds and any business with genuinely non-economic activity: first strip out the non-economic share of general costs, only then apply the Article 17(5) pro rata. Relevant to advisers on IPO, share issue and fundraising costs, where full deduction cannot be claimed simply because capital strengthens the business generally.

C-240/05 Eurodental

Judgment · 7 December 2006 · Luxembourg

Input tax on cross-border supplies of dental prostheses

The Court held that a transaction exempt within a Member State under Article 13A(1)(e) does not give rise to a right to deduct input VAT under Article 17(3)(b), even where it is an intra-Community transaction. The specific public interest exemption takes precedence over the general exemption for intra-Community trade. That conclusion applies regardless of the VAT system in the Member State of destination, including where that State still taxes such supplies under the transitional derogation in Article 28(3)(a). Exempt operators cannot recover input tax by pointing to the cross-border character of their output supplies.

C-63/04 Centralan Property

Judgment · 15 December 2005 · United Kingdom

Capital goods adjustment where a building is disposed of by two linked supplies

Provided each transaction transfers the right to dispose of the property as owner under Article 5(1), a matter for the national court, both are supplies for Article 20(3) purposes, and the goods are treated for the rest of the adjustment period as used partly for taxable and partly for exempt activities in proportion to the respective values of the two transactions. The holding is confined to inextricably linked transactions, one exempt and one taxable. No need to consider abuse of rights. Apportionment by value applies on a capital goods disposal even though Article 20(3) contains no express apportionment mechanism and speaks of a single supply.

C-376/02 'Goed Wonen'

Judgment · 26 April 2005 · Netherlands

Retroactive legislation withdrawing a property deduction adjustment

Because the amending law had already taken effect, retroactively, before the deduction was made, Articles 17 and 20 were not engaged, so Schlossstraße did not apply. The general principles do not preclude retroactivity granted exceptionally to prevent large scale use of contrived arrangements during the legislative process, provided operators were warned clearly enough to understand the consequences. Whether the risk justified retroactivity and whether the press releases were sufficiently clear are for the national court. Distinguishes cases where the deduction was already exercised before the legislative change (protected) from cases where the deduction is claimed after the retroactive effective date (not protected).

C-25/03 HE

Judgment · 21 April 2005 · Germany

Deduction for a home office in a jointly owned house

He acts as a taxable person and may deduct under Article 17 to the extent he allocates the office to his business. Where the marital community has no legal personality and carries out no economic activity, the co-owners are the recipients. He may deduct all input VAT attributable to the part used exclusively for business, capped by his interest in the co-ownership (here 25%). A joint invoice without apportionment suffices. National extra invoicing particulars cannot defeat deduction where there is no fraud risk. Confirms that co-ownership under national civil law does not dictate who is the recipient of a supply or the extent of deduction.

C-487/01 Gemeente Leusden and Holin Groep

Judgment · 29 April 2004 · Netherlands

Withdrawal of the option to tax property lettings and capital goods adjustments

Withdrawal of the option is permitted and may carry with it adjustment of deductions on let immovable property under Article 20(2), which is not an exhaustive list and covers legislative change. Adjustment may arise from circumstances outside the taxpayer's control. The Member State must, however, respect legitimate expectations in the implementing arrangements, though repeal of advantageous legislation is not in itself a breach. Article 5(7)(a) concerns application of goods for business purposes and cannot be used for such a legislative withdrawal. Landlords and developers who deducted input VAT on the basis of an opted-to-tax letting cannot resist adjustment merely because the option was removed by law rather than by their own choice. Relevant to property funds, local authority sports and leisure lettings, and sale-and-leaseback style structures relying on the option.

C-442/01 KapHag

Judgment · 26 June 2003 · Germany

Admission of a partner in return for a cash contribution

A partnership which admits a partner in return for a cash contribution makes no supply of services for consideration to that person. The mere acquisition and holding of shares or interests is not an economic activity, and the same follows for their transfer. It is irrelevant whether the admission is characterised as an act of the partnership or of the existing partners. The second question therefore did not need answering. The intake of new capital by a partnership falls outside VAT altogether rather than being an exempt financial transaction, so tax authorities cannot use the share exemption to block deduction of set-up costs such as legal and structuring fees. Relevant to closed property funds and other partnership vehicles raising capital from investors, and to advisers on fund formation costs.

C-78/00 Commission v Italy

Judgment · 25 October 2001 · Italy

Refund of excess VAT by issue of government bonds

The Member State was not entitled to discharge the credits in that way. Member States have some latitude over the conditions of refund, but those conditions must allow the taxable person to recover the whole of the credit within a reasonable period, by payment in liquid funds or equivalent means, and must not expose him to any financial risk. Bonds maturing after five or ten years, delivered late, fail that test. The small number of traders affected, and the practical difficulty of remedying the position, were irrelevant. The benchmark for national refund mechanics. Relevant to persistently repayment-position businesses (importers, exporters, zero-rated sectors) in Member States operating unorthodox refund arrangements or budget-driven delays.

C-345/99 Commission v France

Judgment · 14 June 2001 · France

Partial relaxation of an existing exclusion from the right to deduct

The Court found no infringement of the Sixth Directive. Applying the reasoning on transitional provisions in Norbury Developments, the Court held that Article 17(6) precludes widening exclusions but not narrowing them. Replacing a total exclusion for private cars with a partial deduction limited to vehicles used exclusively for driving instruction reduces the scope of the existing exclusion and moves the legislation towards the general regime in Article 17(2), so it remains covered by the standstill derogation. The action was dismissed. Confirms that a standstill exclusion can be dismantled in stages and on the Member State's own terms, provided the net effect is less restrictive than the position at entry into force. Relevant to advisers testing national blocking orders on cars and similar expenditure, particularly in the motor trade and driving instruction sector.

C-322/99 Fischer and Brandenstein

Judgment · 17 May 2001 · Germany

Private allocation of business goods bought without deduction, taxing subsequent component parts

No tax arises on the goods themselves where input VAT was not deductible on acquisition. Tax under Article 5(6) applies only to component parts. Goods (not services, nor services with ancillary goods) which definitively lose their physical and economic distinctiveness on incorporation and produce a lasting increase in value not entirely consumed at the time of allocation. The taxable amount is the price of those component parts at allocation. Where work falls outside that concept, the deduction must be adjusted under Article 20(1)(b) unless its value was fully consumed in the business. Confirms the practical framework for withdrawals of second-hand assets bought from private persons, relevant to motor dealers, professionals with business cars, and any business allocating margin-scheme or non-deductible assets to private use.

C-177/99 Ampafrance and Sanofi

Judgment · 19 September 2000 · France

The French derogation blocking deduction on accommodation and entertainment is invalid

The Court declares the decision invalid. A derogation under Article 27 must be proportionate to the aim of preventing evasion or avoidance, and a blanket exclusion covering all such expenditure, including expenditure which is demonstrably incurred strictly for business purposes, goes beyond what is necessary. The Court declined to limit the temporal effects of its judgment. Decided together with Ampafrance, this is the leading authority on the limits of Article 395 derogations.

C-98/98 Midland Bank

Judgment · 8 June 2000 · United Kingdom

Direct and immediate link, deduction on litigation costs following an output transaction

A direct and immediate link is in principle required, both for entitlement and for its extent, and the test is the same whichever of Article 17(2), (3) or (5) governs the output. Applying it is for the national court. Services used as a consequence of, and after, a deductible output transaction generally lack that link. They are general costs, deductible only in part, unless the taxable person shows by objective evidence that the expenditure forms part of the cost components of that output transaction.

C-134/97 Victoria Film

Judgment · 12 November 1998 · Sweden

Whether a tax rulings board may refer questions to the Court

The Court declined jurisdiction. Although the Revenue Board is independent, statutory and issues binding decisions, when giving an advance decision on request it acts before any tax authority decision exists, adopting a first view on the tax treatment of a transaction rather than reviewing legality. That is an administrative function, comparable to binding tariff information, not proceedings intended to lead to a judicial decision. Only a court hearing a challenge to such a decision may refer. None of the substantive questions on the Swedish copyright exemption or on invoking taxability to obtain deduction were answered.

C-85/95 Reisdorf v Finanzamt Köln-West

Judgment · 5 December 1996 · Germany

Proof of the right to deduct, original invoice or copies

Member States may treat as an invoice not only the original but also any other document serving as an invoice which meets criteria they themselves set. They may equally decide that no other document qualifies where an original was drawn up and is held by the recipient. Separately, since Article 18 governs only exercise of the right, not later proof of it, Member States may require the original on inspection and, where the taxable person no longer holds it, may admit other cogent evidence that the transaction actually took place. The judgment separates exercise of the deduction right from its proof on subsequent audit, and leaves both largely to national rules. Relevant to construction and property projects with long invoice trails and to anyone advising on document retention and audit defence.

C-62/93 BP Supergas

Judgment · 6 July 1995 · Greece

Special petroleum VAT regime and the right to deduct

The regime is precluded because Article 11 requires taxation at each marketing stage on the value at that stage, and the right of deduction may be limited only by derogations expressly provided for. Greece's transmission of the whole draft law, without a notification expressly referring to Article 27(2), did not secure Council authorisation. The general exemption for transport and storage exceeded Article 14. The taxable amount and deduction provisions have direct effect, and refunds run retroactively, subject to national procedural rules meeting equivalence and effectiveness. Confirms that sector specific regimes replacing staged taxation with a single upstream charge, and stripping the sector of deduction, are unlawful absent a properly notified Article 27 derogation.

C-4/94 BLP Group

Judgment · 6 April 1995 · United Kingdom

Direct and immediate link, input VAT on an exempt share sale

Those services give no right of deduction. Save where the directives expressly provide otherwise, services used by a taxable person for an exempt transaction do not give rise to a right of deduction, even where the ultimate purpose of that transaction is to carry out taxable transactions. The goods or services must have a direct and immediate link with the taxable transactions. The taxable person's ultimate aim is irrelevant. Article 19 was inapplicable, the services having been used for an exempt transaction. Questions 2 and 3 unanswered. The foundational authority on attribution of input tax.

C-342/87 Genius Holding

Judgment · 13 December 1989 · Netherlands

No deduction of VAT due solely because it is invoiced

The right of deduction applies only to tax actually due, that is tax corresponding to a transaction subject to VAT. It cannot be exercised where the tax invoiced exceeds the amount legally due or the transaction is not taxable, and an initial deduction must be adjusted accordingly under Article 20(1)(a). Neutrality is preserved because Member States must allow correction of tax improperly invoiced where the issuer shows he acted in good faith. The second question did not require an answer. The foundational authority that an invoice is not a deduction entitlement in itself. Relevant to construction and subcontracting chains and to any sector operating domestic reverse charges.

Related topics

Origin and scope of right of deduction · Rules governing exercise of the right of deduction · Fiscal neutrality · Adjustment of deductions · Restrictions on the right of deduction · Obligations of taxable persons · Proportional deduction · Tax evasion and abuse · Economic activity · Proof